Q4 2024 Liberty Energy Inc Earnings Call
Joining us on the call are bonkers that incoming chief Executive Officer, and Michael Stark Chief Financial Officer.
Before we begin I would like to remind all participants that some of our comments today may include forward looking statements.
Reflecting the company's views about future prospects revenues expenses or profits. These.
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.
Our teams that are detailed in our earnings release and other public filings.
Our comments today also include non-GAAP financial and operational measures.
non-GAAP measures, including EBITDA adjusted EBITDA and adjusted net income adjusted net income per diluted share and cash return on invested capital are not a substitute for GAAP measures that may not be comparable to similar measures of other companies.
Reconciliation of net income to EBITDA and adjusted EBITDA net income to adjusted net income and adjusted net income per diluted share in the calculation of adjusted pre tax return on capital employed and cash return on invested capital as discussed on this call are available on our Investor Relations website.
Ron: I will now turn the call over to Ron.
Ron: Good morning, everyone.
Ron: Thank you for joining us to discuss our full year and fourth quarter 2020 for operational and financial results.
Ron: Liberty delivered strong leadership in technological innovation and execution excellence in 2024.
Ron: Solid financial performance and several operational records were achieved even as industry activity softened through the year.
Ron: We concluded the year with revenue of $4 $3 billion.
Ron: Net income of $316 million and adjusted EBITDA of $922 million.
Ron: Full year return of capital employed was 17% and our 2020 for cash return on capital invested of 21% exceeded the 13 year S&P average.
Ron: We executed on our fleet transition initiatives cost optimization efforts using AI enhanced digital systems and expansion of our natural gas fueling and delivery capacity to optimal scale.
We are relentlessly focused on long term value creation balancing compelling growth opportunities with return of capital to shareholders.
Ron: Since July 2022, we have distributed $550 million to shareholders through the retirement of 15% of shares outstanding and quarterly cash dividends.
Ron: We have built strong partnerships and investments across the energy corridor in geothermal nuclear battery power generation technologies, and the Australian beetle New basin assets.
Ron: We have an undeniable opportunity to leverage our knowledge experience and expertise in energy systems to meet a rising power demand in North America.
Ron: As we embark on an extraordinary new chapter for our company our founder Chris Wright is similarly, charting a new path as the U S Secretary of energy on behalf of the Liberty family I'd like to extend a heartfelt congratulations to my Dear friend of over 20 years for his visionary leadership and significant contribution to liberty and the broader energy.
Ron: Sector.
Ron: Entering 2025, we have two key strategic priorities.
Ron: Technology innovation and leadership in completion services and significant expansion of our burgeoning power generation services business.
Ron: As the pre eminent completion service provider the innovation cycle and software equipment and design is driving long term margin enhancement improvements in capital efficiency and lower emissions. Our technology team has led advances in design and development of the latest engine technologies for completion services applications.
Ron: Yesterday, we announced the latest iteration of development for our <unk> platform with the industry's first natural gas variable speed large displacement engine with Cummins a partner of ours since the founding of our firm the.
Ron: Its engine enhances our already industry, leading digi fleet offerings by combining high fuel efficiency with the ability to manage transient load and precision rate control unrivaled in the industry.
Ron: We have built an integrated ecosystem of software that seamlessly brings together, our digi technologies with advanced cloud based software for our pump control systems power generation demand management, and logistics platform and onsite fuel management software systems.
Ron: This ecosystem reduces the total cost of delivery, improving our returns and lowering the cost to bring a barrel of oil to the surface for our customers.
Speaker Change: We are also excited to celebrate the incredible operational feat achieved by one of our Digi Prime please.
Speaker Change: In 2024, this Liberty fleet set a single crew company record of 7143 hours pumped in a year, averaging nearly 600 hours per month. This equates.
Speaker Change: To approximately 96% of available hours of the year under normal dedicated fleet utilization.
Speaker Change: As we look ahead Liberty has an historic opportunity to deliver differentiated power services and solutions to meet growing energy demand.
During 2024, we put into motion our distributed energy business that provides a compelling alternative to traditional generation and transmission.
Speaker Change: Harmful energy policy high regulatory barriers and decades of Underinvestment in grid infrastructure have increased the fragility of the grid and hindered the ability to respond quickly to growing demand.
Speaker Change: The rising demand for electrons from the proliferation of data centers onshoring of manufacturing activity expansion in mining operations and industrial electrification provides a supportive backdrop to expand our power generation business outside the oilfield.
Speaker Change: We are uniquely positioned to rapidly deploy distributed modular power solutions with low emission scalable power infrastructure tailored to meet specific project demands.
Liberty brings together a distinctive set of strengths that put us in an advantaged position to grow a successful power business. Since 2011, we have deployed almost $5 billion in capital to build a high returns completion business, which now operates and maintains more than 3000 pieces of rotating heavy equipment and remote harsh.
Speaker Change: <unk> across North America, we have a foundational culture that attracts and retains great people all of whom strive to deliver at the highest level. Our service delivery is augmented by extensive engineering expertise in engine technologies mobile power plant Assembly and asset operation in the rigors of the oilfield.
Speaker Change: Ensuring thoughtful power generation asset selection and easing future deployment and other applications.
Speaker Change: We also have critical supply chain relationships built over our history that enhance the innovation cycle and ensure timely access to key components.
Speaker Change: We have a large operations platform across the United States, and Canada, including equipment packaging capabilities to ensure we can fabricate deliver and support each installation together these strengths enable us to build a distributed power business with durability and longevity over the coming years.
Speaker Change: We are growing our partnerships in the areas of critical technology and infrastructure development to ensure we can provide a coordinated solution that addresses all aspects of our power generation application reliability expectations load variability gas supply quality emissions requirements and cooling needs amongst other considerations demand strong engineer.
Speaker Change: Bring support paired with a range of technology offerings.
Speaker Change: We will provide an infrastructure delivery mechanism for electrons that fits the specific application in.
Speaker Change: In the near term, we are targeting merchant power data centers commercial EV charging stations and micro grids for resource extraction applications. We have already successfully deployed 130 megawatts, primarily for Digi fleet applications.
Speaker Change: By the end of 2026, we expect to take delivery of and deploy an incremental 400 megawatts of power generation with the initial deployments commencing later this year.
Speaker Change: Frac markets reached a trough at the end of 2024 after progressive quarterly declines in industry activity since early 2023.
Speaker Change: Early signs of an inflection in completions activity you have now emerged from 'twenty to 'twenty four lows oil producers, which comprise the vast majority of frac activity are working to simply maintain production and are returning to anticipated activity levels. After the year end slowdown improve.
Speaker Change: Improving natural gas fundamentals are encouraging for.
Speaker Change: For the full year industry wide lateral footage completed is expected to be approximately flat with 2024.
Speaker Change: The slowing pace of activity in late 2024 resulted in near term price pressure to start 2025, most notably impacting conventional fleets.
Speaker Change: <unk> outlook for next generation higher quality fleets remain strong as operators continue to demand technologies that provide significant emissions reductions fuel savings and operational efficiency advantages.
Liberty: The growing complexities of E&P demands and the continued drive for efficiency gains necessitate continued investment in technology and partnerships with high quality service companies Liberty is well positioned to meet this demand.
Liberty: Fleet idling attrition and cannibalization of aging equipment likely accelerate in the next two years as a large swath of tier two equipment reaches end of life.
Liberty: Concurrently fleet sizes continue to expand to meet increased horsepower requirements for higher intensity fracs.
Liberty: These two dynamics imply the supply and demand balance and horsepower is tighter than industry Frac fleet counts and FERC.
Liberty: An improvement in Frac activity through the year could support better pricing dynamics.
Liberty: Global oil markets reflect the ongoing uncertainties and geopolitics Chinese economic growth OPEC, plus production plans and a change in the domestic political climate, but the resulting commodity price fluctuation has not yet led to a meaningful change in E&P activity plans natura.
Liberty: Natural gas demand is supported by LNG export capacity expansion and a large projected multiyear increase in north American power consumption.
Power demand is rising at the fastest pace since the start of the century as accelerating demand from data centers is converging with the re shoring of manufacturing activity and projected increases from mining electrification and other commercial and industrial applications.
Liberty: This pace of growth requires power infrastructure solutions that can be adapted to the dynamic needs of individual customers Liberty is well positioned to meet this demand with a modular solution that offers reliability redundancy and the ability to accelerate deployment timelines and scale alongside growing load requirements.
Liberty: Entering 2025, we are excited to lead the industry with innovative and durable technologies that will drive our continued success in the years ahead, we are investing to build truly differential competitive advantages both in the completions arena and in our new power business to generate significant value for our customers and our shareholders.
Liberty: We expect our investments today will lead to strong returns in the coming years.
Liberty: In the first quarter, we anticipate a modest sequential increase in revenue and adjusted EBITDA for the full year within the completion services business, we expect solid free cash flow generation as capital expenditures moderate even as pricing headwinds impact profitability.
Liberty: As we embark on the next chapter of Liberty story, we will also significantly grow our investment in power infrastructure to take advantage of a generational opportunity in power demand growth.
Speaker Change: With that I'd like to turn the call over to Michael stock, our CFO to discuss our financial results and outlook.
Michael Stock: Good morning, everyone. We are pleased to achieved solid financial results with strong returns and free cash flow that has allowed us to deliver a healthy return of capital to shareholders, while reinvesting in our long term initiatives while.
Michael Stock: While markets are continually continuously evolving the way we manage our basement remains the same growing our competitive advantage generating strong cash returns and maintaining a fortress balance sheet, while delivering strong returns to shareholders through cycles. We're at an exciting time in the D. J as we accelerated.
Michael Stock: And that power business and advanced technology innovation and in the completions business.
Michael Stock: The North American completions industry is reaching maturation and required completions activity to meet E&P production goals and growth opportunity in completions has now defined by leading edge engineering and technology innovation driving organic market share gains and margin enhancement leveraging digital systems and vertical integration.
We are continuing pushing beyond that prior achievements and will lead the industry, regardless of where we are in the cycle.
Michael Stock: In power, we now have an unprecedented opportunity to build a differential business just as we didn't completions 30 years ago, our business that has delivered an average croce, 24% over its history.
Michael Stock: The ability of pad business with significant competitive advantages driven by the unique people and culture of Liberty designed to deliver strong cash returns on organic technology and equipment investments and are using it.
Michael Stock: During the next two years, you will see us execute in a variety of power generation installations, including mentioned pad generation conventional industrial projects, including Datacenters and distributed Microgrid generation for the energy and mining sectors.
Michael Stock: A strong pipeline of opportunities they provide significantly more demand for liberty power and we will be able to supply in the next two years.
Michael Stock: We are designing our pad business for the division variety market, which we believe will be inherently less cyclical and have a lower risk profile than at historic Frac business. We are targeting a long term croce in the high teen percentage rate.
Michael Stock: We are building an enduring business for decades to come we are focused on bringing together, great technology and partners and investing in advantaged assets that provide sustainable long term advantages, we aim to be the partner of choice for the delivery of power.
Michael Stock: For the full year revenue was $4 3 billion compared to $4 7 billion in 2023, representing a 9% decline.
Michael Stock: Excuse me net income totaled $316 million and adjusted net income was 277 million and excludes 39 million of tax effected unrealized gains on investments.
Michael Stock: Fully diluted net income per share was $1.87 and adjusted net income per diluted share was $1 64 things.
Michael Stock: Full year, adjusted EBITDA was $922 million compared to $1 2 billion in the prior year.
Michael Stock: In the fourth quarter of 2024 revenue was $944 million, representing a sequential decline of 17% driven by market headwinds largely unexpected budget exhaustion and a partial quarter impact of two fewer fleets deployed.
Michael Stock: Fourth quarter net income of $52 million compared to 74 million in the prior quarter.
Michael Stock: <unk> net income of $17 million compared to 76 million in the prior quarter.
And excludes a $5 million in Texas.
Michael Stock: Unrealized gains on investments.
Michael Stock: Fully diluted net income per share was 31, <unk> compared to <unk> 44 cents in the prior quarter and adjusted net income per diluted unit was <unk> <unk> compared to 45 since the prior quarter.
Michael Stock: Fourth quarter, adjusted EBITDA was $156 million compared to $248 million and five <unk>.
Michael Stock: General and administrative expenses totaled 56 million in the fourth quarter largely in line with the third quarter and included noncash stock based compensation of $7 million.
Michael Stock: Other income items in total included $83 million for the quarter inclusive of the aforementioned $45 million of unrealized gains on investments.
Michael Stock: Interest expense of $8 million, and a $3 million loss related to tax receivable agreements.
Michael Stock: Fourth quarter tax expense was $6 million approximately 10% pre tax income cash taxes were $5 million source of cash as a result of the collection of a prior period or the payment. While we expect tax expense rate in 2025 to be approximately 22% pre tax income and cash taxes to be 1% to 2%.
Michael Stock: And that then our effective book tax rate.
Michael Stock: We ended the year with a cash balance of $20 million of Nic data of $471 million net debt increased by $67 million from the prior year in 2020 for cash flows were used to fund capital expenditures of $127 million in share buybacks and.
Michael Stock: And $48 million in cash dividends.
Michael Stock: Total liquidity at the end of the year, including availability under the credit facility was $135 million.
Michael Stock: Net capital expenditures were 188 million in the fourth quarter and $627 million for the full year, which included investments in digitally LTI gas compression and delivery infrastructure with same technology capitalized maintenance spending at our projects.
Michael Stock: At 124 results showcasing our ability to deliver a robust return of capital program, while investing in high return projects to expand our competitive advantage.
Speaker Change: Over two and a half years ago, we reinstated our return of capital program post pandemic. Cynthia we have now distributed over the half a billion dollars to shareholders through share buybacks and cash dividends. We are committed to shareholder returns and in the fourth quarter, we repurchased 28 million or approximately 1% of that she is outstanding.
Speaker Change: And increased our dividend by 14% to 18. This year, we now have $294 million remaining on our buyback authorization.
Speaker Change: As wrong sheet area, we expect a modest sequential uptick in the first quarter for revenue and adjusted EBITDA for the full year, we anticipate adjusted EBITDA will be in the 700 million to $750 million range as headwinds from the late 2020 full service pricing impacts offset favorable fleet mix and optimization.
Speaker Change: As the year progresses, we believe the opportunity for price improvement could materialize as frac activity improves through the year.
Speaker Change: Our completions capital expenditures moderate in 2025 to approximately $450 million, including $175 million in maintenance capital expenditures and the remaining related to the replacement cycle of 45 digitally as we retire legacy conventional equipment.
Speaker Change: Pace of next generation deployment moderates to these levels versus the accelerated investment in the early part of the cycle.
Speaker Change: Within our power business, we expect to take delivery of approximately 150 megawatts of power generation by the end of 2025 and another 250 megawatts by the end of 2026 at 2025 capital expenditures to power generation and related ancillary equipment are expected to be approximately $200 million.
Speaker Change: Together total capital expenditures will be approximately $650 million in 2025, we have significant flexibility in adjusting our capital spending to meet incremental demand.
Speaker Change: We are focusing on investing for the long term competitive advantages and are excited for the coming years as we lean into the growth and expansion of a truly differentiated power business and in reinforcing continued leadership in our completions business.
Ron: I will now turn it back to the operator for Q&A after which Ron will have closing comments at the end of the call.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys. If it had any China. Her question has been addressed and we would like to withdraw your question. Please press Star then two.
Ron: At this time, we will pause momentarily to assemble our roster.
Stephen: And our first question will come from Stephen <unk> with Stifel. Please go ahead.
Speaker Change: Thanks, Good morning, everybody.
Speaker Change: Good morning, Tom.
Stephen: Two things for me.
Stephen: First on.
Speaker Change: On the on the flat pricing side can you talk a little bit about when you Michael gave some some sort of commentary on 25.
Speaker Change: EBITDA expectations can you talk about kind of in rough terms, where youre seeing crack.
Speaker Change: Pricing right now relative to maybe 12 months ago.
Speaker Change: Yeah.
Speaker Change: Yeah, certainly, Steve and I, obviously, frac pricing has softened a little bit over the over the last year as well as we've said already you know we.
Speaker Change: We saw a peak in the market probably mid to late 2022, and we've had a slow and steady trend downwards from that point in time.
Speaker Change: And we certainly felt that headed into the RFP season for 2025, and so we're off their little exact levels vary depending on the technology Youre talking about so.
Speaker Change: You know the older tier two assets, probably most impacted by that we've seen very good resiliency in the pricing for next generation assets, even as we head into 2025, so the digi platform holding up very very well from a margin standpoint.
Speaker Change: Just add a little color to that I mean at this very much feels like the trough coming in it was a very soft Q4. So therefore, it was a sort of a david of salt repricing environment already sort of feeling a little bit more.
Speaker Change: Positive as we turn the corner into the beginning of the year. So it feels like we're kind of at the trough of the cycle, but I.
Speaker Change: History will prove.
Speaker Change: Greg One thing and one thing about that one Steve I, just want to kind of point out that gathered by the looks of it you know as the average profitability per fleet at the moment at the trough of this cycle looks to be about sort of the midpoint, so a little bit hot.
Speaker Change: And the midpoint of the last cycle so.
Speaker Change: We've sort of talked about before the.
Speaker Change: The completions business is getting better.
Speaker Change: There's less providers there is less excess equipment.
Speaker Change: Moving through the cycle at least violence.
Speaker Change: It's very very we think it's proving to be very very positive.
Speaker Change: Great. Thanks, and then my other question.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: My exactly sure how to ask this but when we think about the power Gen business and we think about the power needs for Frac.
Speaker Change: How old is he.
Speaker Change: Either the E&P Andrew are you think about the arbitrage between using the power outside of the oil patch, where maybe people are less price sensitive versus powering new planes for jobs, which are half due to run fracs, where the pricing might be lower.
Speaker Change: So how do you balance that that sort of price ARP.
Speaker Change: Interesting question, Stephen but of course, we got into the power generation for a very specific reason as we deploy assets into Frac, we always want to have as much control over the key variables that play into the success of Frac operations as we can that includes vertical integration and supply chain.
Speaker Change: Manufacturing of key components.
Speaker Change: You know for a while we were in the wellhead business because that was holding up Frac operations, we were very intentional about our decision to get into supplying power.
Speaker Change: For the Frac business to support our <unk> deployment and that was for a couple of reasons number one we want to be able to deliver efficiency at the levels. Our customers have come to know what to expect from Liberty and that happens by virtue of having control over all of those aspects of the business, including the fuel supply for that so L. P. I N G molecule delivery.
Speaker Change: And the power generation assets themselves.
Speaker Change: And that remains an important priority for us today did he is a is a key piece of our puzzle out there it's working hard for.
Speaker Change: For some of our great partners in the in the Permian Basin and in the DJ and and so we have power generation attached it out with the goal of ensuring our.
Speaker Change: The levels of service they've come to expect from Liberty over the long term and we're not going to waver from that yes.
Speaker Change: Also I'll just remind you we have a sort of a two pronged view of how we do.
Speaker Change: The natural gas.
Speaker Change: <unk>.
Speaker Change: The move into natural gas for Frank right. We have does your frac fleets, which are pure electric where we have electric generation into a PD you unit that can also be integrated into the grid and then we had energy prime units, which are more have a lower average per capital cost and a slightly more efficient on fuel usage that a direct drive right. So we have a balance.
A assets and so therefore, when we look at that sort of allows us to have sort of a very very good focus on purely so driving next generation technologies and the next example by adding a new comings announcements.
Speaker Change: Frank and then also having that flexibility that we have had a mobile power generation for Frank when and if the grid arrived for the customers that need that in some of those units maybe freight they can just as easily be rolled into a data commissioning project for data center.
Speaker Change: Sort of modal power for that so again electrons out of asset altogether.
Speaker Change: I wouldn't be used in multiple areas and this is a very very sort of like flexible.
Speaker Change: I'll ask and multiple products that we build.
Speaker Change: Okay, great. Thank you gentlemen.
Aaron: Our next question will come from Aaron <unk> with J P. Morgan. Please go ahead.
Speaker Change: Yeah, Good morning, Ron.
Aaron: And Michael.
Speaker Change: I was wondering if you could help us think about or frame.
Speaker Change: The returns opportunities from from deploying in a mobile power generation understanding.
Speaker Change: That you are still in the process of deploying more of the capacity outside of the oil and gas industry, but how should we think about paybacks in investments and returns relative to your you know your frac business.
Speaker Change: Yeah. Good question Arun.
Speaker Change: We've kind of outlined we have a multi pronged approach to deploying our power generation outside of oil and gas we've identified.
Speaker Change: A number of areas that we think we can deliver differentiated services and so those include our merchant power opportunity that includes we announced a partnership with D C grid around EV charging.
Speaker Change: Data centers will of course be a part of our puzzle along with some other commercial and industrial applications and then.
Speaker Change: Of course, some work inside of resource extraction oil and gas and remote mining as well now each of those has a bit of a different outlook in a little bit different duration, let's say on the on the contract term that we would have with them and we'll think about the returns profile for each of those in accordance with that so for example, if we are going to provide.
Speaker Change: Long term firm power for a data center and we have a 20 year PPA to go along with that we would accept a different returns profile in that environment than we might in a shorter term bridge power environment.
Speaker Change: Where we could be looking at a contract term, maybe two years or so and so as we progress the conversations for each of these opportunities we have in the pipeline. That's really the consideration we're going to have some stuff that's going to be in that maybe two to 678 year range, we're going to have some stuff that's going to be in the 15.
Speaker Change: The 20 plus year range and.
Michael Stock: And we'll balance the return profiles of each of those accordingly, but as Michael said in his prepared remarks, we're targeting averaged across that business. A return profile that has that is somewhere in the in the mid to high teens across that entire portfolio.
Michael Stock: I think the rate kind of on that one I ruined by balancing those different return prevalence as ramzi, we still plan to significantly exceed the average of the S&P 500, which is of course and with a lot less cyclical business than the completion has been over the last 12 years.
Speaker Change: Understood I wanted to follow up on the released with Cummins on the new variable speed.
Speaker Change: Gas powered engine.
Speaker Change: Ron is there any IP that that Liberty has as part of this and also just wanted to get your thoughts as you deploy.
Speaker Change: This capacity in 2025, what are some of the financial benefits.
Speaker Change: Two liberty, a you'd mentioned lower fuel costs, obviously that will accrue to the customer but from a is it lower maintenance capex. How do we think about the impact from this in terms of your opex or anything like that.
Speaker Change: In a relative.
Speaker Change: So the current Ah you know did the fleets that you have out there.
Speaker Change: So from an IP standpoint, we do have some IP on the digi platform that.
As a important piece of our puzzle.
In this case.
Speaker Change: The IP around the specific engine it would become an IP and so we leave that to we leave that to them, but we do have a we do have an arrangement with them is as the launch partner of this that has us in an advantaged position for the.
Speaker Change: The deployment of that engine over the coming years.
Speaker Change: As far as what that means out in the field the great thing about moving to a natural gas engine. While there are a number of positives around it of course, you mentioned the fuel.
Speaker Change: That doesn't first of all that doesn't all accrue to the customer part of our mechanism for recouping. The capital investments in these assets is to is to keep some portion of those fuel savings.
Speaker Change: The opportunity for the conversation with the customer is is around that meaningful change from running a fleet on diesel to running a fleet on natural gas and a path that allows us to earn a return on that additional invested capital without meaningfully changing the price to the customer around their around their completions.
Speaker Change: And then if you think about the advantages that that also brings to us that could accrue in terms of the cost of operating natural gas engines have a significantly longer time between overhaul as compared to a diesel engine. So in the Liberty World. We see overhaul time is maybe 20 to 25000 hours on a diesel engine.
Speaker Change: We haven't got to a major overhaul on any gas engine in our fleet yet today, but we expect that number to be north of 60000 hours and potentially approaching 80000 hours. So it's going to be two to three X time between major overhauls on those engines.
Speaker Change: Even the basic maintenance costs, when we talk about fundamental.
Speaker Change: Over month maintenance those costs are lower than they are for a diesel engine and so we will see those as those advantages as well as as this becomes a larger and larger piece of our fleet.
Speaker Change: The variable speed engine means that ultimately we can deploy a complete digi private fleet to the to the field, we talked about it originally with the constant speed engine is did you probably providing baseload capacity compared with either tier four DGB or D. G. Frac. The electric offering we now have the ability to put a digi prime fleet are out in the field.
Speaker Change: <unk>.
Speaker Change: Did you buy from start to finish allows us to manage both the baseload horsepower plus those rig transients and fine tuning that we need on a given location.
Speaker Change: Thanks, Ron.
Speaker Change: Of course.
Speaker Change: And our next question will come from <unk> <unk> with Goldman Sachs. Please go ahead.
Speaker Change: Hi, Good morning team I was just wondering for the early deployments you noted for later this year, how should we think about the end market and contract duration and is there a target mix between the markets that you identified that you'd like to have by year end next year.
Speaker Change: So as we as we worked through that deployment. Starting later this year we're targeting.
Speaker Change: I'll say for now a relatively even spread amongst the areas we've identified so.
Speaker Change: Merchant power commercial and industrial and data center applications. It may not be exactly 33, 33, 33, but but roughly in that area.
Speaker Change: As we think about the business going forward, that's important for us to have.
Speaker Change: Multiple legs on the stool.
Speaker Change: Insurers are balanced business for us with a good cross section of contract portfolio.
Speaker Change: Early est applications for us probably come on the merchant power and EV charging side of things I think that'll be the first place that we will have assets deployed and then.
Michael Stock: A little bit longer for the data centers, Michael do you have something you want to add there great Yeah, and I think obviously the.
Michael Stock: Resource Extractions of micro grids also will be sort of some of the others, but yeah, I think ron's right. I mean, ultimately you know sort of outperformance will probably move towards some of the larger when you get large megawatt size and some of the largest data center applications.
Michael Stock: And again I think through sort of the early path through the 26 numbers.
Michael Stock: Are you thinking about the theatre food and the food and thinking through that and Tim's instead of.
Michael Stock: Got it.
Michael Stock: So the long term is a bridge and as Ed mentioned Im sorry, youre going to balance the balance of contract and a balance of risk profiles and a balance of long term cash flows.
Michael Stock: Got it that's helpful. And then you mentioned capex needs for the power business. So if you can talk about the return of capital expectations and impacts around that capex need for this yard and would it make sense to add any debt to the balance sheet to fund this growth.
Michael Stock: Yes.
Michael Stock: When you look at when you're looking at.
Michael Stock: Sort of back into the numbers right. We can find we can fund this growth.
Michael Stock: This sort of initial.
Michael Stock: This initial.
Michael Stock: Cap rates on the pad business.
Michael Stock: Right.
Michael Stock: We can also support sort of an organic sort of.
Michael Stock: Buybacks and a dividend of course, but this is a very fast changing market, we have a significant opportunity pipeline.
Michael Stock: And we're always making sure that we continue with a fortress balance sheet and investing early in the cycle for these great opportunities. So you know this is a fast changing market and we.
Michael Stock: We will announce things as they come along.
Michael Stock: Got it thank you.
Speaker Change: Question will come from Scott Gruber with Citigroup. Please go ahead.
Speaker Change: Yes, good morning.
Speaker Change: Power, obviously, an exciting opportunity, but we have seen several others into the power space.
Speaker Change: Provide some more color on how you're thinking about kind of our competing.
Speaker Change: The others in the space you know obviously as we think about kind of what you guys have.
Speaker Change: Built in Frac, which is competitive but you guys have built the moat around enhancing your frac equipment, and providing analytics et cetera.
Speaker Change: How do you think about it.
Speaker Change: All competing on the power side.
Speaker Change: Z Disney equipment offering going in any different or is it really.
Speaker Change: You know all competing on the service side.
Speaker Change: Yeah, Scott I think you make a point good point by by looking at what we've done in the Frac business like if you if you buy a frac from Liberty, you're not just buying a frac people told US you are getting into a commodity business and of course nothing could be further from the truth, Yes, you get a you ultimately get a frac.
Speaker Change: Out on location, but you get a frac underpinned by industry, leading technology by World class supply chain by a strong engineering team by unrivaled service fundamentals all executed by by a team that has probably been together for years, given our industry, leading turnover rate in our in the org.
Speaker Change: <unk> and so you bring all of those things together and that is ultimately led to.
Speaker Change: US being the number one frac provider ranked year over year and kimberlite surveys and.
Speaker Change: So I don't view, the power business any differently than that yeah.
Speaker Change: Yes, we're going to sell electrons to a data center or to the grid or to an E&P customer, but that offering is going to be underpinned by.
Speaker Change: Strength in service delivery by our strong supply chain by a leading team of technology folks that insurers when we choose an asset of power generation asset to put in the field that we put the best possible asset out there that builds in longevity durability to the business.
Speaker Change: Thank you.
Speaker Change: You have to be very very thoughtful about these things it is not a level playing field by any stretch of the imagination. If you think about playing in the merchant power space for example, bringing the right asset to the table there.
Speaker Change: Is critical in terms of.
Speaker Change: Amount of deployment time capacity factor ultimately for that in maximizing the spark spread the price between natural gas and the price of an electron.
Speaker Change: I think we've proven ourselves very thoughtful and all of these areas when it comes to Frac and our ability to deliver at a level that exceeds.
Speaker Change: Anybody else in the space it will be no different in the power generation space, where we are bringing to the table I think a platform that is that is unrivaled by certainly anybody else who has talked about entering the space or is entering the space today, and so I think youll see that play out in our results over the coming years, Yeah, and I think we'll talk about the solution.
Speaker Change: Right, we have a modular solutions in the last year building the design engineering for it.
Speaker Change: We are able to execute these in blocks drive we have sort of a modular skid mounted 10% to 12 megawatt blocks that come with skid mounted transformation controls and Brian is it allows you to basically a movie or the assembled these in a factory moves aside put the trench and put the grounding in and in our rates that have gone very very quickly.
Speaker Change: Now those blocks can be put together 10 of those into a 100 megawatt 120.
Speaker Change: Unit, we also had 25 megawatt blocks using the larger four and a half to five megawatt.
Speaker Change: Reciprocating engines, the same thermal efficiency as a baseline which is again you've ever been to these recently heading engines are thinly efficient combined cycle plants were built before 2018.
Speaker Change: Difficult, even more efficient than peak.
Speaker Change: We have two bonds.
Speaker Change: Yeah. The other part that we're going to do we will be using packaged device is specific applications where.
Speaker Change: The power.
Speaker Change: <unk> needs to be small or in areas for resource extraction. If you think of the oil and gas area, where we're using some field gas we have some gas quality.
Speaker Change: That is not necessarily the base for reciprocating engines. So we have sort of these state of blocks that allows us to come to market very very quickly reduce EPC cost and the key thing in the electrification of everything at the moment is going to be the fact that there is a.
Speaker Change: Significant significant.
Leg of trades people across the country right. So going modular building in a factory. So gives me reduces the amount of electricians that you need the amount of people that you need on site to put these power plants together in a cost effective way for the final deliverable atrium.
Speaker Change: Well I appreciate all that color and I just wanted to dig into the merchant power opportunity.
Speaker Change: I'm just curious is that a situation where you would dedicate some equipment to maybe try to capture the elevated spark spread like in Texas during the summer kind of while you're waiting for a longer term opportunity or is that.
Speaker Change: An opportunity where the equipment gets dedicated to merchant power on a go forward basis, just trying to understand that opportunity and how you guys think about it.
Speaker Change: Yes, it will be coming out and talking about that in more detail, but really the next conference call and give you some area around that but there is a great long term and great long term opportunity.
Speaker Change: For areas, where we've got significant transmission issues for a serious amount of time, where you've got great loan growth right, so sort of helping.
Speaker Change: Sinn our numbers all the.
Speaker Change: The areas, whether it be call it a PJM in modeling that in areas, where they need the power.
Speaker Change: It's really where it's going to be like but yes. We also can have the ability to integrate our.
Speaker Change: When we think about it is bridge to backup and Wheeling power onto the grid to improve returns right. So you're going to have estimates that over the life of 'twenty LG alive.
Speaker Change: Return profile is going to move at the return profile is going to be used for different things right. You can provide bridge Bala.
Speaker Change: Sure.
Speaker Change: The data seem to when the grid gets there.
Speaker Change: Negate the need for the <unk> diesel backup power, but you've already got a Greenwich Canadians you can take advantage of the spark spread at different times to improve your return profile right. So it is going to be a lot of different.
Speaker Change: Contracting.
Speaker Change: Different parts of <unk> business, that's very very exciting and very very interesting.
Scott Gruber: Scott I would just add that.
Scott Gruber: From a from a grid congestion standpoint.
Scott Gruber: Grid instability standpoint that that problem is only getting worse today, we know how to fix that of course in this country, but the ability to address that challenge is something that takes a meaningful amount of time first of all it's going to take some change in policy.
Scott Gruber: The ability to actually get infrastructure constructed, but even beyond that there was a significant time component to that and so we view that as an opportunity. That's got some real durability to it and in fact, I think it's probably a growing opportunity as far out as we can see today.
Speaker Change: I appreciate all the color I'll turn it back thank you.
Marc Bianchi: Our next question will come from Marc Bianchi with TD Cowen. Please go ahead.
Marc Bianchi: Thank you and.
Speaker Change: Congratulations Ron.
Marc Bianchi: Yeah I was curious on the.
Speaker Change: On the 400 megawatts how much of that at this point is under some kind of binding commitment with the customer.
Speaker Change: Yes, so the 400 megawatts as all of the supply chain. So there's lots of audit and those binding commitments are in negotiation at the moment for two days.
Speaker Change: Okay. The last half of 2026 is still in what I consider sort of that.
Speaker Change: The midpoint of the pipeline.
Speaker Change: Okay.
Speaker Change: When should we hear more about that would you anticipate over the next few months that we sort of hear about kind of the entirety of the 400 or or what would be a timeline to set some expectations for people.
Mike: To be honest, Mike will give.
Speaker Change: To give you more color every time.
Speaker Change: Something comes along in the quarter, but it's in the Frac business, we don't discuss that customers very detailed right. We are focused on building a business right. We have a 12 year track record investing $5 billion worth of equipment and delivering a 23% anchor tenant on cash in payment over that period of time right. We are building a loan too.
Speaker Change: I would say generational business year, right and so we will have significant amounts, but do we have.
Speaker Change: The size of the business, we're building is not going to be custom.
Speaker Change: Customers wish to announce.
Speaker Change: Providing half of them were happy to accommodate that but as with the freight business you don't see us announcing.
Speaker Change: One two data kind of fleets with.
Speaker Change: G&P operators right.
Speaker Change: We deliver strong returns in our business.
Speaker Change: By managing it properly, we don't sort of like have a tendency to talk in detail about those customer relationships.
Speaker Change: We will give you will give your contract to we'll give you guidance and we will give you return profiles.
Michael Stock: Okay, great. Thanks, Michael one other.
Michael Stock: With the with the EBITDA outlook for the year and the Capex. It would appear that I heard you on solid free cash flow for completions, but maybe overall for total company free cash flows in the <unk>.
Speaker Change: Ballpark of breakeven I don't know if you if that's the right read on that but in that context, how should we start with looking at positive breakeven is positive. Okay. So how should we be thinking about the share repurchase in that context. If you have should we be thinking about excess free cash kind of goes towards the repurchase or would you be looking to.
Michael Stock: To borrow a little bit to do some more repurchase.
Speaker Change: We looked at at all.
Speaker Change: Share repurchases as opportunistic depending on where the share prices right.
Speaker Change: Investing in long term in our power business and Thats going to change sort of over the course of the year and we will look at that generally we are not borrowing.
Speaker Change: Cash to fund the share repurchase that we drive strong free cash flow and our free cash flow generating business right. If we borrowed money it would be because we had some large opportunities in the policy on top of this 400 megawatts. Then we were actually providing the finding people right. So that's the way we think about it right.
Speaker Change: When you look at our business we have.
Speaker Change: A business that is strongly free cash flow and if we think FCA prices under valued at that point, we will be opportunistic share prices. We don't we're not really borrowing to fund the shape to fund a share buyback right therefore, expanding it.
Speaker Change: Borrowing money.
Speaker Change: Borrowing money to fund the growth. So that's the way we think about running the business.
Speaker Change: Yeah very helpful. Thanks, so much I'll turn it back.
Speaker Change: Thanks Mark.
Speaker Change: Question will come from Rob <unk> with Bank of America. Please go ahead.
Speaker Change: Hi, good morning, Ron and Mike.
Speaker Change: Good morning.
Speaker Change: Mike maybe I wanted to follow up a little bit on marks question on contract right and again I don't want to stop at two years, because I know you are building the power business for the long term. So when you have discussions with the customers on Oh, My God, what kind of contract durations are you looking at how long that customers willing.
Speaker Change: Same same sign up for.
Speaker Change: For Pollo need if you can give some color on that that would be helpful.
Speaker Change: Yeah, I mean those.
Speaker Change: Those vary depending on the end use application at the very short end of things Youre talking about a scenario, where we might be providing.
Speaker Change: Bruce power to a data center for example that might be two or three years as before the grid gets there at which point in time. There then becomes a conversation around the assets remain there and a backup application is there an opportunity to be generating power and selling that back to the grid, but think about that as the short end of things and.
Speaker Change: On the long end, a 20 plus year power purchase agreement is is entirely possible. If we are going to be the firm power provider for a data center. There is absolutely a willingness out there to sign a 20 year agreement to do so and then we'll think about it our returns profile as we said commensurate with that.
Speaker Change: Term of that deal and what that looks like from a utilization standpoint for the asset.
Speaker Change: Okay Fantastic no. That's helpful. And then John maybe one quick one I know this has been discussed in the past, but now that you had actually ordering equipment 400 megawatt maybe needs to revisit that topic also not guess V seems to us its still behind especially all these applications you are talking about merchant power EV charging.
Speaker Change: Data Center can you talk about the relative merits and be made it. So one what is the other and how would you think about that in your portfolio well followed openings.
Speaker Change: Yeah, I I am glad you asked the question sorry, but that's a that's an important point and one we like to make sure is well understood.
Speaker Change: We chose natural gas Recip engines for our power generation for a number of reasons modularity is a key piece of the puzzle being able to adapt to changing load profiles, depending on the situation. We're deploying assets into that allows us to be very very capital efficient.
Speaker Change: We think about each opportunity that we're looking at.
Speaker Change: Natural gas Recip engines are incredibly efficient when it comes to the use of fuel and without getting too far into the weeds I'm, an engineer I like to nerd out on stuff like this but.
Speaker Change: If you think about our natural gas Recip engine it turns.
Speaker Change: 44% of the available energy and a unit of fuel into useful work in this case electricity.
Speaker Change: If you take a gas turbine and put it in the same application it turns.
Speaker Change: It varies a little bit on the size of the turbine, but I'm going to say roughly a third of the available energy in a unit of fuel into useful work and so if you think about that comparison.
Speaker Change: It means that we're going to burn a third less fuel to accomplish the same outcome when compared to a gas turbine and if youre thinking about building durability longevity into a business like this ensuring your ability to be competitive whether it's four in supplying electrons to a data center or providing electricity.
Speaker Change: On to the grid.
Speaker Change: Maximizing that efficiency maximizing the spread between the cost of your fuel and.
Speaker Change: And the.
Speaker Change: Power that youre able to sell is critical to being competitive in that space and so for us that's why spark ignition gas recip engines make the most sense now there are a couple of things where a turbine.
<unk> offers a compelling consideration and Michael alluded to those already in his comments first of all they have a little bit more flexibility when it comes to the input fuel source. So a natural gas recip engine likes a very consistent fuel source thats primarily methane.
Speaker Change: Problem, if you're out of distributed gas system, if youre going to be out in the field and you have a rich gas supply that is going to be better tolerated by a turbine and so that would be a place where a turbine would probably shine. The other the other places that there really is a difference as power density if youre talking about a very very large.
Speaker Change: Asian, hundreds and hundreds and hundreds of megawatts youre going to be able to accomplish that in a smaller footprint with a turbine then you could with gas recip engines. So power density fuel flexibility, probably the two considerations that you would lean towards a turbine, but if you are truly looking at if you have a good stable gas.
Speaker Change: And youre looking towards longevity durability competitiveness in this space, that's where we think gas recip really shines in.
Speaker Change: And why we lean towards that.
Speaker Change: Perfect No. That's that's fantastic color on we can keep going on this discussing but let me stop there and done it back. Thank you.
Speaker Change: Alright, thank you.
Speaker Change: Okay.
Speaker Change: The next question will come from Dan Kutz with Morgan Stanley. Please go ahead.
Dan Kutz: Hey, Thanks, good morning.
Dan Kutz: Good morning, and congrats Ron and congrats to Chris as well on the new rules.
Speaker Change: I guess, just a couple of housekeeping questions on the power business.
Speaker Change: I was wondering if you could share kind of the useful life of the power Gen units I know, it's kind of early stages, an end, but just wondering if you have a view or expectation on the useful life and also kind of the associated maintenance costs or maintenance cycles.
Speaker Change: Yeah Yeah.
Speaker Change: Yeah go ahead.
Speaker Change: So if you think about these gas engine as I said, we haven't got one even get to a major overhaul yet but based on the guidance we have from our from our partners on the manufacturing side, whether that'd be Cummins Caterpillar Rolls Royce MCU or yen Walker Youre talking about time between major overhaul. So when we actually take that engine out of service and Terry.
Speaker Change: Right down.
Speaker Change: The bones and rebuild it.
Speaker Change: 80000 hours, that's that's probably approaching 10 years at 24, $703 65 operation, maybe maybe nine years and change it but if I'm doing the math right in my head but.
Speaker Change: It's a long long time, and that's just for a major overhaul.
Speaker Change: We will overhaul of diesel engine at least once and it's.
Speaker Change: And it's like with US maybe two or three times and so if we think about that for these power generation assets Youre talking about a lifespan thats measured in decades and decades.
Speaker Change: Awesome, that's really helpful. And then I guess just pulling on a comment in there.
Repaired remarks, and from the press release about your view did.
Speaker Change: Yeah, the footage drilled the total U S year over year will be roughly flat.
Speaker Change: Is the read on that that you.
Speaker Change: The view is that liberty's horsepower demand will.
Speaker Change: It will be roughly flattish year over year, which I guess you know you can have potentially some offsetting.
Speaker Change: <unk> increased efficiencies, but also increase the intensity I E.
Speaker Change: Increased horsepower per fleet and just wondering if you could unpack that comment and the implications for your view on Liberty horsepower demand in 2025. Thank you.
Dan Kutz: Yes, Dan I think youre thinking about that exactly right of course.
Dan Kutz: We talk about flat lateral footage that offers the same opportunity for work that has to be done in the field. As you saw last year, we continue to find ways to get a little more efficient year on year on year and so.
Dan Kutz: On one hand, what youll, probably see us headline fleet count come down a little bit to accomplish the same amount of work, but the counter to that too to exactly. The point you made is the intensity of that work.
Dan Kutz: A good part of that efficiency is being driven by a move to simulcast rack and <unk> frac operations and that requires only what we call a single fleet on location, but ultimately a fleet that has a lot more horsepower attached to it.
Dan Kutz: So you have those two puts and takes that are that really.
Dan Kutz: Trade off against one another and so I think as we think about it from the Liberty standpoint, the horsepower that we are going to have a working is actually going to be relatively flat, which leads to this point around the idea that the market could tighten sooner than you might perceive just from looking at headline fleet count. That's the number that gets published all the time and.
Dan Kutz: Do you see that come down a little bit, but I don't think that provides a clear picture as to how quickly the market really could tighten given the draw on incremental horsepower inside of each additional fleet that could be something we see play out later this year, particularly if theres a bit of a rebound in gas activity.
Awesome I appreciate all the time.
Dan Kutz: I'll turn it back.
Speaker Change: Our next question will come from Waqar Sayed with ATV capital markets. Please go ahead.
Waqar Sayed: Thank you for taking my question.
Dan Kutz: I'm going to.
Dan Kutz: Follow up on just the fracking business side I think just didn't have that business. So.
Dan Kutz: Yes.
Dan Kutz: Yeah.
Dan Kutz: Just on the Taylor side like if you hit a lot at some of the E&ps have.
Dan Kutz: Drilled and completed wells that have not been connected Carolinas, yet do you have a sense of how large that inventory is in as.
Dan Kutz: Our company started too many drill production like how long will that take exhaust that before they go into.
Dan Kutz: You know going up to the docks.
Waqar Sayed: Waqar I don't know that I have an exact answer to your question certainly those tools exist out there and with strength in gas prices and a strengthened forward strip I think youre going to start to see some of that.
Dan Kutz: Come online.
Dan Kutz: I'd say probably.
Dan Kutz: I don't think we have a great outlook on exactly how long that will take them two to play out there's probably some variables that come into that.
Dan Kutz: Probably need to wait until the shoulder season, when we get a good sense of exactly how many heating days, we ended up with this winter what that does to storage levels and that will probably play into that decision for them, but but I think there's a reasonable possibility we could see a response in rig count by the second half of this year.
Dan Kutz: And and then headed through the tail end of the year and into 2026.
Dan Kutz: That's probably the best guess as I could give you today.
Dan Kutz: Okay great.
Speaker Change: And then just going back to the pharma business. If I may do you see that opportunity for you, mostly what region do you see that in our Rockies as well.
Speaker Change: Some data centers and other things being built in North Dakota, there is some excess gas there.
Speaker Change: Obviously, I mean, Andy is the big opportunity. So maybe you see recently that up with J D play out.
Speaker Change: Yeah, obviously, there's there's a range of opportunities across the country there.
Speaker Change: And I expect that as our as we grow the foundation of this business. We will we will step into a number of those as I highlighted maybe is one of the advantages we bring to the table our footprint across North America gives us the ability to support installations in a wide range of places the DJ Basin would be an example for that.
Speaker Change: And so we'll look at all of those as they come in.
Speaker Change: Early days, I think youre going to see primary.
Speaker Change: Deployments in in Texas, that's where a lot of that demand is coming from initially, but Michael mentioned the east Coast I think we definitely see some opportunity out there and then we'll start to layer on additional locations after that but as with everything we do we're going to approach the business thoughtfully at a good cadence and make sure.
Speaker Change: We can provide the level of service Liberty has come to be known for and that means not.
Speaker Change: Not jumping onto a pile of widespread opportunities and losing the focus that we like to maintain.
Speaker Change: Great well. Thank you very much really appreciate the answers and good luck.
Waqar Sayed: Thanks Waqar.
Speaker Change: Okay.
Speaker Change: Our next question will come from Tom Curran with Seaport Research. Please go ahead.
Tom Curran: Good morning, guys, Ron Let me Echo everyone else kudos on essentially taking the helm here and your first policy.
Speaker Change: Thanks very much.
Speaker Change: Yeah, you bet. How are you positioned at this point for MPI supply change disruptions as it relates to the gas recent gen sets the passage turbines and any other key assets, you'll need to provide as part of your partnership with DC grid.
Speaker Change: Yeah, I would say incredibly well positioned.
Speaker Change: One of the things we pride ourselves on as an organization is not only being the provider of choice to our customers, but being the purchaser of choice to our suppliers. So we have worked very very hard over the entire history of liberty to be a great partner to our suppliers.
Speaker Change: We own a meaningful amount of our success as an organization to their support.
Speaker Change: And so.
Speaker Change: That partnership whether it's with caterpillar with Rolls Royce and to you with Cummins.
Speaker Change: Those are long time partnerships that we have built and and growing over the history of Liberty and we will carry on now into the power generation business and so that offers us a real opportunity as maybe.
Speaker Change: One of their largest partners in the oilfield services side to carry that over to power generation and so for US the lineup. This 400 megawatts.
Speaker Change: <unk> of capacity that we're going to deploy over the coming year.
Speaker Change: It is.
Speaker Change: Something that is very very manageable for us and as Michael said, it's already in the queue and I would say that I'm very comfortable we could expand on that if we chose to going forward.
Speaker Change: We have we have those strong partnerships and I think we're going to get a lot of support from the supply chain standpoint in terms of being able to deliver in an incredibly timely fashion relative to two others.
Speaker Change: Earlier in the call Ron you did allude to the fact that you know historically liberty hasn't hesitated to vertically integrate and offering in order to software pinpoint or to seize an opportunity too.
Speaker Change: Innovate and improve on it somehow are there any aspects of LTI existing our expected asset fleet you might bring in house and have led manufacturer.
Speaker Change: Well.
Speaker Change: I think at this point in time, and probably a little early to say for sure. We will lean on our packaging engineering design and packaging capabilities. So I expect that we will own the engineering controls design.
Speaker Change: All of that stuff from bottom up for.
Speaker Change: Not only the generation capacity, but also balance of plant that will be inside the Liberty World, We will lean on the lat team in El Reno to.
Speaker Change: To help with timely packaging to ensure that we can meet short timeframes that we're being asked about so we're going to leverage some of those things vertical integration capabilities that we already have in house and as we begin to identify other opportunities that make sense that are well aligned with our strengths and capabilities.
Speaker Change: As you said, we wouldn't hesitate to step into those but I wouldn't name any today.
Speaker Change: Outside of where we're really focused.
Speaker Change: And then just shifting to the labor side.
Speaker Change: Hi.
Speaker Change: How does the labor intensity differ from the servicing side and are there any unique considerations when it comes to recruitment and training.
Speaker Change: Or that's the type of crews are going to need for LTI.
Speaker Change: Obviously that side of the business is going to be significantly less labor intensive than frac is our oilfield services operation we do.
Speaker Change: <unk>, a meaningful number of people out into the field to support each and every one of our Frac fleets out there. This business on the power side is going to be a lot less people heavy.
Speaker Change: For not only the design.
Speaker Change: Packaging and construction, but even the support over the long term from a recruitment standpoint, that's not something I ever worry about at Liberty, we have such a strong name in the in the industry today.
Speaker Change: Our ability to attract people to the Liberty the Liberty family as has always been something we've prided ourselves on we've always had far more resumes in the.
Speaker Change: People to choose from than we've had opportunities to offer employment and I don't view that as any different in this case, we've started to add that expertise to our our family of.
Speaker Change: Liberty already given our power generation in the Frac business. So we have medium voltage elect electricians and whatnot on staff. So we.
Speaker Change: We're starting to we're starting to build that expertise in frac and we will have that to leverages, we begin to expand into the power.
Speaker Change: Power generation space.
Speaker Change: Very helpful. Thanks for sneaking me in and taking all the questions.
Tom Curran: Alright, Thanks, Tom.
Speaker Change: And our next question will come from Eddie Kim with Barclays. Please go ahead.
Eddie Kim: Hi, good morning, sorry, if I missed this but is there anything at all that different about the nature of the equipment.
Eddie Kim: On the incremental 400 megawatts versus the 130 megawatts you already have deployed on your digi fleets either from a power density standpoint, or anything like that or is it is it pretty much the same equipment and separately just your guidance on the power related Capex and 25 of 200 million implies about.
Eddie Kim: One 3 million of Capex per megawatt for this year is that also a fair assumption to use for the 26 deliveries.
Eddie Kim: As well or should we maybe expect to see some level of inflation next year.
Eddie Kim: Yeah, So a couple.
Eddie Kim: Let me take the first question and then we'll then we'll touch on that second one as well so in terms of differences not a huge amount there there'll be a couple of things I would point out for our Frac business of course, we built everything is mobile power generation. It's all on wheels, because we drive it out to a location we set it up its there for 30 days, we tear down and we moved to another location.
Eddie Kim: As we think about the power generation World, we're likely to be in a spot in some cases for decades at a time and so we're likely to build far less mobile power generation. There is likely to be skid mounted gained more of a stationary application. We will also bring to the table a larger <unk>.
Eddie Kim: Generation assets in the power Gen business than we do in the Frac business. So again thinking about mobility versus something that could be stationary for awhile.
Eddie Kim: We're comfortable bringing.
Eddie Kim: Heavier larger asset to the table for for those power generation situations, So youre going to see in our portfolio there.
Eddie Kim: For example, the 44345 megawatt gas Recip engine from <unk> as a case, so that's not something that we would probably put in our in our Frac business, just given the size and scale of that engine.
To your second question around the Capex. There is a couple of variables that will play into that one of them as it is just around timing.
Eddie Kim: Around pace of taking delivery of assets versus <unk>.
Eddie Kim: Deployment deposits and things like that so.
Eddie Kim: That is part of the variable, but then the other thing you want to think about is if we think about the broader picture.
Eddie Kim: Deploying not only the power generation, but also balance of plant.
Eddie Kim: Transformers the bus.
Eddie Kim: The the conduit and cable and things like that.
Eddie Kim: We think about in round numbers of megawatts of power costing about $1 million, but once you layer that balance of plant on top you talked probably talking about something closer to one four.
Eddie Kim: 131 $4 million as a round number to include everything thats going to vary a little bit application by application.
Eddie Kim: Pending on how much work, we're going to have to do whether it is a gas pipeline to be built or not whether the substation exists or not so youll see a little fluctuation in that number but but that is the other reason you see probably a little higher capex per megawatt deployed than just the flat cost of generation.
Eddie Kim: Understood got it thanks for all that color and then just a quick follow up.
Eddie Kim: Have the deliveries of the <unk> hundred <unk>.
Eddie Kim: <unk> deliveries of 100 megawatts by the end of this year have those orders already been placed.
Eddie Kim: And if so should we expect to see the majority of that 20 million Capex hit to take place in the first half of this year just trying to think about lead times for this equipment.
Eddie Kim: Is it a year year and a half.
Eddie Kim: Just any any color there would be great.
Speaker Change: Yes, so all of those orders have been placed all of that is underway in our supply chain already so we're firm on taking delivery of that.
Speaker Change: If you think about lead time for the asset it's not a year to 18 months for assets like this.
Speaker Change: I'm framing is shorter than that for us too.
Speaker Change: To be able to take delivery of power generation.
Speaker Change: Even packaged in so so I think thats part of our advantages. We think about these opportunities is just ability to respond very very quickly relative to other solutions in the marketplace today.
Speaker Change: But I would like to clarify all 400 that we've announced are all scheduled in the supply chain coming out of the manufacturers right. Yes, I think ron's alluding to the fact that yes could we add to that with the right opportunities and speed make that in <unk>.
Speaker Change: 400 increased yes, we could but before over 400 is scheduled in manufacturing and his time definite when it's coming out and it will be packaged and ready to go.
Speaker Change: Got it got it thanks for that clarification and all of that color I'll turn it back.
Speaker Change: Our next question comes from Keith Mackey with RBC capital markets. Please go ahead.
Keith Mackey: Hey, good morning, and thanks for taking my questions here.
Speaker Change: Just just Ron since you're building a.
Speaker Change: Business in new industries for as you point out a long term.
Speaker Change: Set of opportunities can you just maybe give us a little bit of color on on how you see the power business unfolding over the next say five years.
Speaker Change: When we think about the level of investment you've outlined for 2025 and 2026, it kind of looks like you could maybe build a business that does between $150 and 200 million of EBITDA in five years. So.
Speaker Change: Which would you be happy with that is that sort of what youre targeting here or is it or is it too early to say what things will look like in that far away.
Speaker Change: I would tell you Keith that I'm incredibly bullish on the opportunities in this business and I think we're going to grow a business larger than you have you have suggested there I really think we have an opportunity over the next five to eight years to grow our business that that maybe rivals our oilfield services business in in scale and.
Speaker Change: Certainly I don't have any reason to say we wouldn't pursue that.
Speaker Change: Okay. Thanks for that.
Speaker Change: And just maybe turning quickly to the Frac business you talk about average fleet size is having to get bigger how is your fleet size has changed over 24, and maybe 25, if you have a sense of that.
Speaker Change: Yeah, I mean, just at a high level, we have more final frac work in our in our world today than we did in 2024, we have some customers who are moving towards that.
Speaker Change: Simulcast varies a little bit from customer to customer, but you could see fleet sizes increase anywhere from 30% to 100% depending on their thoughts around simultaneous where triangle frac.
Speaker Change: Okay. Thanks for that that's it for me.
Speaker Change: Thanks Keith.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Ron for any closing remarks.
Speaker Change: Our mission is a simple one to better human lives.
Speaker Change: That starts here at Liberty with the lives of everyone here in the Liberty family.
Speaker Change: With the success of our business it grows beyond that to the communities we work in and ultimately the world.
Speaker Change: We took a step further in this mission last year with the launch of the veteran human lifestyle Asian, enabling a more direct path to address the urgent challenge of energy poverty in Africa.
Speaker Change: I could not be prouder of our team and all of that we have accomplished in pursuit of this mission.
Speaker Change: Journey that Chris started us on almost 14 years ago and has never wavered from it.
Speaker Change: I am excited to carry on our pursuit of that mission as we start the next chapter in the Liberty story.
Speaker Change: And with a thank you to the entire Liberty family. While it is not always recognize the world depends on you and the work that you do each and every day. Thanks.
Speaker Change: Thanks for that.
Speaker Change: Thank you for joining us on the call today.
Speaker Change: Yeah.
Speaker Change: Conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: [music].