Q3 2025 Liberty Energy Inc Earnings Call

Speaker #1: Welcome to the Liberty Energy earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Anjali Voria: Welcome to the Liberty Energy Inc. Earnings Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Anjali Voria, Vice President of Investor Relations. Please go ahead.

Speaker #1: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Anjali Voria, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Bailey. Good morning, and welcome to the Liberty Energy third quarter 2025 earnings conference call. Joining us on the call are Ron Gusek, Chief Executive Officer, and Michael Stock, Chief Financial Officer.

Bailey: Thank you, Bailey. Good morning and welcome to the Liberty Energy Inc. Third Quarter 2025 Earnings Conference call. Joining us on the call are Ron Gusek, Chief Executive Officer, and Michael Stock, 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 view about future prospects, revenues, expenses, or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on the current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today may include non-GAAP financial and operational measures.

Speaker #2: 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 view about future prospects, revenues, expenses, or profits.

Speaker #2: 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 the current conditions that are subject to certain risks and uncertainties detailed in our earnings release and other public filings.

Speaker #2: Our comments today may include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted pre-tax return on capital employed, and cash return on capital invested, are not suitable for GAAP measures and may not be comparable to similar measures of other companies.

Bailey: These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted pre-tax return on capital employed, and cash return on capital invested, are not substitutes for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income and adjusted net income per diluted share, and the calculation of adjusted pre-tax return on capital employed and cash return on capital invested, as discussed on this call, are available on our Investor Relations website. I will now turn the call over to Ron.

Speaker #2: A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income, and adjusted net income per diluted share, as well as the calculation of adjusted pre-tax return on capital employed and cash return on capital invested, as discussed on this call, are available on our investor relations website.

Speaker #2: I will now turn the call over to Ron.

Speaker #3: Good morning, everyone, and thank you for joining us to discuss our third quarter 2025 operational and financial results. Liberty achieved revenue of $947 million and adjusted EBITDA of $128 million in the third quarter, despite a slowdown in industry completion activity and market pricing pressure.

Ron Gusek: Good morning, everyone, and thank you for joining us to discuss our third quarter 2025 operational and financial results. Liberty achieved revenue of $947 million and adjusted EBITDA of $128 million in the third quarter, despite a slowdown in industry completions activity and market pricing pressure. Our team delivered solid operational results, once again delivering the highest combined average daily pumping efficiency and safety performance in Liberty's history. We are committed to driving outstanding results for our customers while navigating current market challenges. Our leadership in technology innovation and service quality delivers differential results, strengthening long-term relationships and reinforcing our competitive position through cycles. While we anticipate market headwinds will persist in the near term, we are well positioned to capitalize on opportunities that will make us stronger as the cycle improves. Our DigiPrime fleets are achieving outstanding performance and leading efficiency metrics across the company.

Speaker #3: Our team delivered solid operational results, once again achieving the highest combined average daily pumping efficiency and safety performance in Liberty's history. We are committed to driving outstanding results for our customers while navigating current market challenges.

Speaker #3: Our leadership in technology innovation and service quality delivers differential results, strengthening long-term relationships and reinforcing our competitive position through cycles. While we anticipate market headwinds will persist in the near term, we are well-positioned to capitalize on opportunities that will make us stronger as the cycle improves.

Speaker #3: Our DigiPrime fleets are achieving outstanding performance and leading efficiency metrics across the company. Several fleets deployed with our largest customers broke new records for pumping hours, horsepower hours, and proppant volumes pumped during the quarter.

Ron Gusek: Several fleets deployed with our largest customers broke new records for pumping hours, horsepower hours, and profit volumes pumped during the quarter. Additionally, our team's uniquely engineered DigiPrime pumps are realizing measurable cost improvements relative to conventional technologies. Early indications show total maintenance cost savings are greater than 30% on DigiPrime pumps. The elegant simplicity of Liberty's design reflects advanced engineering and thoughtful innovation, resulting in a streamlined, power-dense unit that delivers superior performance and increased output between maintenance cycles. Across our fleet, we are also driving meaningful efficiencies for our customers with our AI-driven, automated, and intelligent rate and pressure control software, STEM Commander. This advanced fleet control software enables pump operators to navigate diverse fleet designs while seamlessly managing on-site pressure and rate.

Speaker #3: Additionally, our team's uniquely engineered DigiPrime pumps are realizing measurable cost improvements relative to conventional technologies. Early indications show total maintenance cost savings are greater than 30% on DigiPrime pumps.

Speaker #3: The elegant simplicity of Liberty's design reflects advanced engineering and thoughtful innovation, resulting in a streamlined, power-dense unit that delivers superior performance and increased output between maintenance cycles.

Speaker #3: Across our fleet, we are also driving meaningful efficiencies for our customers with our AI-driven automated and intelligent rate and pressure control software, STIM Commander.

Speaker #3: This advanced fleet control software enables pump operators to navigate diverse fleet designs while seamlessly managing on-site pressure and rate. By automating these functions, STIM Commander delivers significant benefits: faster and more consistent stage execution, reduced time on location, fuel savings, lower emissions, and improved safety.

Ron Gusek: By automating these functions, STEM Commander delivers significant benefits: faster and more consistent stage execution, reduced time on location, fuel savings, lower emissions, and improved safety. Today, fleet automation is driving a 65% improvement in the time to deliver the desired fluid injection rate and a 5 to 10% improvement in hydraulic efficiency. This marks the culmination of a decade of effort by the Liberty team, enhanced by the strategic acquisition of SLV's completion technologies during the COVID downturn. Liberty's cloud-based platform, Forge, further empowers STEM Commander with intelligent asset orchestration through continuous AI optimization. By analyzing billions of data points and leveraging years of Liberty's best-in-class operational execution, Forge enhances STEM Commander's performance and precision. We mistakenly called it a large language model in our press release, but it isn't static AI. It's a distributed agentic intelligence system built for the field.

Speaker #3: Today, fleet automation is driving a 65% improvement in the time to deliver the desired fluid injection rate and a 5-10% improvement in hydraulic efficiency.

Speaker #3: This marks the culmination of a decade of effort by the Liberty team, enhanced by the strategic acquisition of SLV's completion technologies during the COVID downturn.

Speaker #3: Liberty's cloud-based platform, Forge, further empowers STIM Commander with intelligent asset orchestration through continuous AI optimization. By analyzing billions of data points and leveraging years of Liberty's best-in-class operational execution, Forge enhances STIM Commander's performance and precision.

Speaker #3: We mistakenly called it a large language model in our press release, but it isn't static AI; it's a distributed agentic intelligence system built for the field.

Speaker #3: It continuously plans, learns, acts, and adapts through real-time feedback and reinforcement loops, ensuring each iteration enhances the next decision. By modeling the evolving behavior of every asset, Forge turns raw data into predictive intelligence, driving compounding performance gains across every stage, fleet, and operation.

Ron Gusek: It continuously plans, learns, acts, and adapts through real-time feedback and reinforcement loops, ensuring each iteration enhances the next decision. By modeling the evolving behavior of every asset, Forge turns raw data into predictive intelligence, driving compounding performance gains across every stage, fleet, and operation. It also integrates critical insights from proprietary Liberty platforms like Fractals, our real-time monitoring and analytics system, to provide comprehensive tracking of fleet condition, performance, and emissions. Together, these technologies create a powerful, adaptive automation ecosystem that delivers increasing operational efficiency and value. Structural demand for power continues to strengthen, as evidenced by large-scale, long-duration power commitments across the industry. AI compute load represents a meaningful long-term growth opportunity, and broader electrification trends and industrial reshoring efforts are also driving incremental, steady base load demand.

Speaker #3: It also integrates critical insights from proprietary Liberty platforms like Fractal, our real-time monitoring and analytics system, to provide comprehensive tracking of fleet condition performance and emissions.

Speaker #3: Together, these technologies create a powerful, adaptive automation ecosystem that delivers increasing operational efficiency and value. Structural demand for power continues to strengthen, as evidenced by large-scale, long-duration power commitments across the industry.

Speaker #3: AI compute load represents a meaningful long-term growth opportunity, and broader electrification trends and industrial reshoring efforts are also driving incremental, steady base load demand.

Speaker #3: At the same time, the grid is facing mounting reliability and capacity challenges driven by increased intermittent generation and a lack of investment in transmission infrastructure.

Ron Gusek: At the same time, the grid is facing mounting reliability and capacity challenges, driven by increased intermittent generation and a lack of investment in transmission infrastructure. Liberty's power opportunities are strengthening as sophisticated electricity consumers seeking dynamic, flexible solutions are recognizing the value of having an advantaged energy partner that provides a solution aligned with their specific needs. Liberty is in close engagement with potential customers with large, highly transient power demand that will benefit from rapid deployment schedules with high-reliability power solutions at grid-competitive prices. Customers will have a key power partner that offers a fully integrated energy solution spanning on-site power, fuel management, and the option for grid integration and attributes. Furthermore, our on-site power solutions are fully customizable power plants that provide consumers with reliability and surety around long-term power costs, serving as a strategic hedge against potentially significant increases in grid power prices.

Speaker #3: Liberty's power opportunities are strengthening as sophisticated electricity consumers, seeking dynamic, flexible solutions, are recognizing the value of having an advantaged energy partner that provides a solution aligned with their specific needs.

Speaker #3: Liberty is in close engagement with potential customers with large, highly transient power demand that will benefit from rapid deployment schedules and high reliability power solutions at grid-competitive prices.

Speaker #3: Customers will have a key power partner that offers a fully integrated energy solution, spanning on-site power, fuel management, and the option for grid integration and attributes.

Speaker #3: Furthermore, our on-site power solutions are fully customizable power plants that provide consumers with reliability and surety around long-term power costs, serving as a strategic hedge against potentially significant increases in grid power prices.

Speaker #3: We are confident in the growth trajectory of our power business and are expanding our power deliveries in anticipation of customer conversions from our expansive pipeline of opportunities.

Ron Gusek: We are confident in the growth trajectory of our power business and are expanding our power deliveries in anticipation of customer conversions from our expansive pipeline of opportunities. We are in the process of securing additional power generation, bringing our total capacity to over one gigawatt to be delivered through 2027, and we expect further increases will be necessary to meet the growing demand for our services. Oil and gas industry frac activity has now fallen below levels required to sustain North American oil production. Oil producers, which comprise a vast majority of North American frac activity, opted to moderate completions against a backdrop of macroeconomic uncertainty and after exceeding production targets during the first half of the year.

Speaker #3: We are in the process of securing additional power generation, bringing our total capacity to over 1 gigawatt to be delivered through 2027. We expect further increases will be necessary to meet the growing demand for our services.

Speaker #3: Oil and gas industry frac activity has now fallen below levels required to sustain North American oil production. Oil producers, which comprise a vast majority of North American frac activity, opted to moderate completions against a backdrop of macroeconomic uncertainty and after exceeding production targets during the first half of the year.

Speaker #3: Slowing trends in oil markets have more than offset increased demand for natural gas fleet activity, where long-term fundamentals remain encouraging, in support of LNG export capacity expansion and rising power consumption.

Ron Gusek: Slowing trends in oil markets have more than offset increased demand for natural gas fleet activity, where long-term fundamentals remain encouraging in support of LNG export capacity expansion and rising power consumption. Moderation in activity anticipated in the near term is transitory in nature. Global oil oversupply is expected to peak during the first half of 2026. Many shale oil producers are targeting relatively flat oil production, requiring modest activity improvement in the coming year from current levels, and long-term gas demand and related completions activity continue to be on a favorable trajectory. Together, these factors set the backdrop for improving frac fundamentals later in 2026, assuming commodity futures prices remain supportive. Lower industry activity and underutilized fleets in today's frac markets are driving pricing pressure, primarily for conventional fleets.

Speaker #3: Moderation in activity anticipated in the near term is transitory in nature. Global oil oversupply is expected to peak during the first half of 2026. Many shale oil producers are targeting relatively flat oil production, requiring modest activity improvement in the coming year from current levels. Long-term gas demand and related completions activity continue to be on a favorable trajectory.

Speaker #3: Together, these factors set the backdrop for improving frac fundamentals later in 2026, assuming commodity futures prices remain supportive. Lower industry activity and underutilized fleets in today's frac markets are driving pricing pressure, primarily for conventional fleets.

Speaker #3: This slowdown is accelerating equipment attrition and fleet cannibalization, setting the stage for a more constructive supply and demand balance of industry frac fleets in the future.

Ron Gusek: This slowdown is accelerating equipment attrition and fleet cannibalization, setting the stage for a more constructive supply and demand balance of industry frac fleets in the future. An improvement in frac activity, coupled with tightening frac capacity, would support better pricing dynamics. The outlook for higher quality next-generation fleets remains strong as operators continue to demand next-generation fleets that provide significant fuel savings, emissions benefits, and operational efficiencies. Liberty's DigiPrime Hybrid Frac System platform continues to see significant demand and more favorable economics through cycles and leverages our total service platform with scale advantages, integrated services, and robust digital technologies. Although industry frac activity has declined since early 2023, the Liberty team has consistently outperformed markets by staying relentlessly focused on customer success and alignment of shared priorities. During the third quarter, we further strengthened our simul frac offering with the reallocation of horsepower for long-term partners.

Speaker #3: An improvement in frac activity, coupled with tightening frac capacity, would support better pricing dynamics. The outlook for higher-quality, next-generation fleets remains strong, as operators continue to demand next-generation fleets that provide significant fuel savings, emissions benefits, and operational efficiencies.

Speaker #3: Liberty's Digi Technologies platform continues to see significant demand and more favorable economics through cycles. It leverages our total service platform with scale advantages, integrated services, and robust digital technologies.

Speaker #3: Although industry frac activity has declined since early 2023, the Liberty team has consistently outperformed markets by staying relentlessly focused on customer success and alignment of shared priorities.

Speaker #3: During the third quarter, we further strengthened our SIMO frac offering with the reallocation of horsepower for long-term partners. We remain focused on expanding competitive advantages through cycles, allowing us to navigate softer anticipated conditions in the months ahead while remaining well-positioned to react swiftly when demand for frac services rises.

Ron Gusek: We remain focused on expanding competitive advantages through cycles, allowing us to navigate softer anticipated conditions in the months ahead while remaining well positioned to react swiftly when demand for frac services rises. We have never been better positioned to face tough markets and take advantage of profitable opportunities. We are excited by the momentum we are seeing in both our completions and power opportunities and are well positioned to deliver an unparalleled offering in the years ahead. I wanted to take a moment to share that we recently welcomed Alice Yake, a recognized energy and infrastructure expert, to our board to help guide and accelerate our efforts in power services. With decades of leadership across energy infrastructure, power service and strategy, and regulatory affairs, as well as critical perspectives on electrical infrastructure challenges, she brings a rare combination of technical depth, policy insight, and executional excellence.

Speaker #3: We have never been better positioned to face tough markets and take advantage of profitable opportunities. We are excited by the momentum we are seeing in both our completions and power opportunities, and are well-positioned to deliver an unparalleled offering in the years ahead.

Speaker #3: I wanted to take a moment to share that we recently welcomed Alice Yake, a recognized energy and infrastructure expert, to our board. To help guide and accelerate our efforts in power services, with decades of leadership across energy infrastructure, power service and strategy, and regulatory affairs, as well as critical perspectives on electrical infrastructure challenges, she brings a rare combination of technical depth, policy insight, and executional excellence.

Speaker #3: As the energy landscape rapidly evolves and demand for resilient, reliable power systems grows, we're excited to move forward with intention. Drawing on her expertise to shape impactful power solutions, I will now turn the call over to Michael to discuss our financial results and outlook.

Ron Gusek: As the energy landscape rapidly evolves and demand for resilient, reliable power systems grows, we're excited to move forward with intention, drawing on her expertise to shape impactful power solutions. I will now turn the call over to Michael to discuss our financial results and outlook.

Speaker #4: Good morning, everyone. Let me begin by celebrating the successes of the Liberty team. Our year-to-date results have been solid during a period marked by macro uncertainty.

Michael Stock: Good morning, everyone. Let me begin by celebrating the successes of the Liberty team. Our year-to-date results have been solid during a period marked by macro uncertainty, OPEC Plus supply increases, and softening frac trends. The Liberty team has outperformed the market by leading in reliability, technology, and service quality across all facets of the business, from frac and wireline to our sand mines and sand handling businesses to CNG deliveries and power services. We are proud of the hard work and dedication our team has shown over the last several years, continuing to drive innovation in equipment and digital technologies and strengthen our long-term competitive advantages. In the third quarter of 2025, revenue was $947 million compared to $1 billion in the prior quarter. Our results decreased 9% sequentially as activity softened following a strong uptick in the second quarter, and market-driven pricing headwinds took hold.

Speaker #4: OPIC+ supply increases and softening frac trends. The Liberty team has outperformed the market by leading in reliability, technology, and service quality across all facets of the business.

Speaker #4: From frac and wireline to our sand mines and sand handling businesses, to CNG deliveries and power services, we are proud of the hard work and dedication our team has shown over the last several years.

Speaker #4: Continuing to drive innovation in equipment and digital technologies, and strengthen our long-term competitive advantages. In the third quarter of 2025, revenue was $947 million. Compared to $1 million in the prior quarter, our results decreased 9% sequentially as activity softened following a strong uptick in the second quarter.

Speaker #4: Our market-driven pricing headwinds took hold. Third quarter net income of $43,000,000 compared to $71,000,000 in the prior quarter, adjusted net loss of $10,000,000 compared to adjusted net income of $20,000,000 in the prior quarter, and excludes a $53,000,000 tax-affected gains on investments.

Michael Stock: Third quarter net income of $43 million compared to $71 million in the prior quarter, adjusted net loss of $10 million compared to adjusted net income of $20 million in the prior quarter, and excludes a $53 million tax-affected gain on investments. Fully diluted net income per share was $0.26 compared to $0.43 in the prior quarter. Adjusted net loss per diluted share was $0.06 compared to a profit of $0.12 in the prior quarter. Third quarter adjusted EBITDA was $128 million compared to $181 million in the prior quarter. General and administrative expenses totaled $58 million in the third quarter, flat with the prior quarter, and included non-cash stock-based compensation of $5 million. Other income items totaled $57 million for the quarter, inclusive of $68 million of gains on investments offset by interest expense of approximately $11 million.

Speaker #4: The diluted net income per share was $0.26, compared to $0.43 in the prior quarter. The adjusted net loss per diluted share was $0.06, compared to a profit of $0.12 in the prior quarter.

Speaker #4: Third quarter adjusted EBITDA was $128 million, compared to $181 million in the prior quarter. General administrative expenses totaled $58 million in the third quarter, flat with the prior quarter, and included non-cash stock-based compensation of $5 million.

Speaker #4: Other income items totaled $57 million for the quarter, inclusive of $68 million of gains on investments, offset by interest expense of approximately $11 million. Third quarter tax expense was $12 million, approximately 22% of pre-tax income.

Michael Stock: Third quarter tax expense was $12 million, approximately 22% of pre-tax income. We continue to expect tax expense rate to be approximately 25% of pre-tax income in 2025, and we expect no significant cash taxes in the fourth quarter. We ended the quarter with a cash balance of $13 million and net debt of $240 million. Net debt increased by $99 million from the prior quarter. Third quarter usage of cash included capital expenditures, working capital, lease payments, debt issuance costs, and $13 million in cash dividends. Total liquidity at the end of the quarter, including availability under the credit facility, was $146 million. Net capital expenditures were $113 million in the third quarter, which included investments in DigiPrime Hybrid Frac System fleets, capitalized maintenance spending, Liberty Power Innovations LLC infrastructure, power generation, and other projects.

Speaker #4: We continue to expect the tax expense rate to be approximately 25% of pre-tax income in 2025. We expect no significant cash taxes in the fourth quarter.

Speaker #4: We ended the quarter with a cash balance of $13,000,000 and net debt of $240,000. Net debt increased by $99,000,000 from the prior quarter. Third quarter usage of cash included capital expenditures, working capital, lease payments, debt issuance costs, and $13,000,000 in cash dividends.

Speaker #4: Total liquidity at the end of the quarter, including availability under the credit facility, was $146,000,000. Net capital expenditures were $113,000,000 in the third quarter, which included investments in DigiFleets, capitalized maintenance spending, LPI infrastructure, power generation, and other projects.

Speaker #4: We had approximately $6,000,000 in proceeds from asset sales in the quarter, and we now expect total capital expenditures for 2025 to be approximately $525,000,000 to $550,000,000.

Michael Stock: We had approximately $6 million of proceeds from asset sales in the quarter, and we now expect total capital expenditures for 2025 of approximately $525 to $550 million. In the fourth quarter, we're anticipating normal seasonal trends relative to the third quarter. EMP production outperformance, coupled with economic uncertainties, already led to an industry-wide activity reduction in the third quarter, setting up a more normal cadence of activity into the fourth quarter. At these levels, we believe the industry activity will begin to stabilize and could see an eventual uptick during 2026. Looking ahead, our 2026 capital expenditures are markedly shifting towards a growing opportunity for power generation services. We now expect to have approximately 500 megawatts of generation delivered by the end of 2026 and over one gigawatt of cubes of power generation by the end of 2027.

Speaker #4: In the fourth quarter, we're anticipating normal seasonal trends relative to the third quarter. EMP production outperformance, coupled with economic uncertainties, already led to industry-wide activity reductions in the third quarter, setting up a more normal cadence of activity into the fourth quarter.

Speaker #4: At these levels, we believe industry activity will begin to stabilize and could see an eventual uptick during 2026. Looking ahead, our 2026 capital expenditures are markedly shifting towards growing opportunities for power generation services.

Speaker #4: We now expect to have approximately 500 megawatts of generation delivered by the end of 2026, and over 1 gigawatt of cumulative power generation by the end of 2027.

Speaker #4: We expect further increases will be necessary to meet significant power opportunities. While our completions capex moderates in the years ahead, we remain relentlessly focused on generating significant value for our shareholders.

Michael Stock: We expect further increases will be necessary to meet significant power opportunities while our completions capex moderates in the years ahead. We remain relentlessly focused on generating significant value for our shareholders. We believe we are fast approaching the bottom of the trough in our cyclical completions business, and we're excited by the momentum we are seeing in power opportunities. As such, we increased our quarterly cash dividend by 13% to reflect the confidence we have in our future and a continued commitment to delivering long-term value to shareholders. I will now turn it back to the operator for Q&A, after which Ron will have some closing comments at the end of the call.

Speaker #4: We believe we are fast approaching the bottom of the trough in our cyclical completions business, and we're excited by the momentum we are seeing in power opportunities.

Speaker #4: As such, we increased our quarterly cash dividend by 13% to reflect the confidence we have in our future and a continued commitment to delivering long-term value to shareholders.

Speaker #4: And we'll now turn it back to the operator for Q&A, after which Ron will have some closing comments at the end of the call.

Speaker #1: 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.

Anjali Voria: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question comes from Steven Gengaro with Stifel.

Speaker #1: If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question comes from Stephen Gengaro with Steeple.

Speaker #5: Thanks and good morning, everybody.

Steven Gengaro: Thanks, and good morning, everybody.

Speaker #4: Hi, Stephen.

Michael Stock: All right, Steven.

Speaker #5: Hi, Ron. I think the first for me is, I think we've in general come to have a lot of confidence in Liberty's deployment of capital. But the big question that we get often is, you know, you have power on order and we're sort of awaiting contracts.

Steven Gengaro: Hi, Ron. I think the first for me is I think we've in general come to have a lot of confidence in Liberty's deployment of capital. The big question that we get often is, you know, you have power on order, and we're sort of awaiting contracts. Can you just talk about your visibility on demand for the power generation assets that you are planning to add over the next 24 months?

Speaker #5: So can you just talk about sort of your visibility on demand for the power generation assets that you are planning to add over the next 24 months?

Speaker #4: Certainly, Stephen, and first of all, I appreciate your recognizing that we are sound stewards of capital. We've done that for 15 years, and I would certainly assure you that we don't view the power business any differently than that.

Ron Gusek: Certainly, Steven. First of all, I appreciate you recognizing that we are sound stewards of capital. We've done that for 15 years, and I would certainly assure you that we don't view the power business any differently than that. This is not something we're going to approach any differently than we have our core business. I would tell you a few things in answer to that. First of all, I think we've learned that it takes a little longer in the power business to get a contract to completion than it does in our core oilfield services business. While you always have lots of great opportunities, and we've talked about our sales pipeline there, it just takes a bit more time to get these things to the place where we're comfortable making an official announcement around them. Maybe in general answer to your question, a few things.

Speaker #4: This is not something we're going to approach any differently than we have our core business. I would tell you a few things in answer to that.

Speaker #4: First of all, I think we've learned that it takes a little longer in the power business to get a contract to completion than it does in our core oil field services business.

Speaker #4: And so, while you always have lots of great opportunities and we've talked about our sales pipeline there, it just takes a bit more time to get these things to the place where we're comfortable making an official announcement around them.

Speaker #4: I would say maybe, in general, in answer to your question, a few things. Number one, in the last 90 days, our sales pipeline has more than doubled.

Ron Gusek: Number one, in the last 90 days, our sales pipeline has more than doubled from what we talked about at the end of the second quarter. I would tell you also that the urgency in that sales pipeline has increased meaningfully. We're absolutely feeling that, and you're seeing that in our response around ordering power. I would tell you that between LOIs and contract terms, we have out in front of customers paper for more than a few gigawatts of capacity needs. I would tell you that ourselves, as the leadership team, together with our board, are sufficiently confident in our ability to convert some of that to long-term contracts that we have made the decisions we have around the ordering of additional capacity.

Speaker #4: From what we talked about at the end of Q2, I would tell you that the urgency in that sales pipeline has increased meaningfully.

Speaker #4: And so we're absolutely feeling that, and you're seeing that in our response around ordering power. I would tell you that between LOIs and contract terms, we have out in front of customers paper for more than a few gigawatts of capacity needs.

Speaker #4: And I would tell you that we, as the leadership team, together with our board, are sufficiently confident in our ability to convert some of that to long-term contracts that we have made the decisions we have around the ordering of additional capacity.

Speaker #4: These conversations will carry on, and when we get to a place where we have paper we're comfortable talking about and making a firm announcement around, we'll absolutely do that.

Ron Gusek: These conversations will carry on, and when we get to a place where we have paper we're comfortable talking about and making a firm announcement around, we'll absolutely do that. In all cases, we're talking about long-duration partnerships here, things that are measured in 15+ years. I would also say that these are things that would be deployed over a period of time. This is not conversations for deployments overnight, but as you've come to see, I think with data centers, things that would grow gradually in building blocks over a period of years.

Speaker #4: I would say that, in all cases, we're talking about long-duration partnerships here—things that are measured in 15 plus years. I would also say that these are things that would be deployed over a period of time.

Speaker #4: This is not a conversation for deployments overnight, but as you come to see, I think with data centers, things would grow gradually in building blocks over a period of years.

Speaker #5: Great. Thanks for all the detail. And just one quick follow-up. Is there a specific customer base we should be thinking about? Is it data centers, energy applications, et cetera, or is it something specific that you're really targeting?

Steven Gengaro: Great. Thanks for all the detail. Just one quick follow-up. Is there a specific customer base we should be thinking about, or is it data centers, energy applications, etc., or is it something specific that you're really targeting?

Speaker #4: I would say that we can, of course, continue to talk to a range of end-use customers. I would say that my expectation is we probably end up with a higher percentage of our capacity with data center customers than maybe we had anticipated at the outset of our foray into this business.

Ron Gusek: I would say that we can, of course, we continue to talk to a range of end-use customers. I would say that my expectation is we probably end up with a higher % of our capacity with data center customers than maybe we had anticipated at the outset of our foray into this business.

Speaker #5: Great. Thanks for the color.

Steven Gengaro: Great. Thanks for the color.

Speaker #4: Thanks, Stephen.

Ron Gusek: Thanks, Steven.

Speaker #1: Our next question comes from Mark Bianchi with Kellen. Please go ahead.

Anjali Voria: Our next question comes from Mark Bianchi with Kellan. Please go ahead.

Speaker #6: Hey, thank you. I guess on the guys, on the financing of all of this capacity that's coming in, where is the capital going to come from?

[Analyst]: Hey, thank you. I guess on the financing of all of this capacity that's coming in, where is the capital going to come from? Are you potentially getting customer prepayments, or maybe we have some sort of PPA and you can finance against that? What should the capital look like for funding this growth?

Speaker #6: Are you potentially getting customer prepayments, or maybe we have some sort of PPA, and you can finance against that? What should the capital look like for funding this growth?

Speaker #4: Yeah, I'll take that one,

Michael Stock: Yeah, I'll take that one, Mark. Power plants, PPAs, or any long-lived assets like this, like we think about how the co-locators or the builders of data centers fund their projects, there will be a long-term ESA, Energy Service Agreement, a PPA. The assets themselves will be most likely for the large load customers dropped down into a project company. Those project companies will be funded via debt that is backed by that PPA or ESA. Think about the fact that most likely that'll be project-specific debt, maybe around, you could get to approximately 70% of the capital needs by debt. It'll be non-recourse for the corporation, probably funded, if you were looking at the debt markets at the moment, anywhere depending on whether you're in construction or whether or not you are in production of electrons.

Speaker #7: Mark: So, power plants, PPAs, or any long-lived assets like this— you know, like we think how the co-locators or the builders of data centers fund their projects. There will be a long-term ESA, Energy Service Agreement, a PPA. The assets themselves will be most likely for the large load customers dropped down into a project company. Those project companies will be funded via debt that is backed by that PPA ESA.

Speaker #7: Think about the fact that, most likely, that'll be project-specific debt. Maybe around 70% of the capital needs could be covered by debt.

Speaker #7: It'll be non-recourse to the corporation, probably funded if you were looking at the debt markets at the moment. Anywhere, depending on whether you're in construction or whether or not you are in production of electrons, that's probably somewhere between mid to high single-digit paper that you're looking at there.

Michael Stock: That's probably somewhere between mid to high single-digit paper that you're looking at there. The balance would come from cash flow, which is, again, the 70% would come from cash flow from the company and corporate debt. We may look at, depending on the size of the project and the partners involved, taking on potentially minority infrastructure partners alongside us in some of those projects. That's the large load. When you think about the data center, the big large load projects, or even the large load CNI, if you think about greenfield industrial projects. The smaller projects, if you think sub-100 megawatts, will be funded on the balance sheet. Those ones where you think about oil and gas customers, etc., they will be maybe of shorter term, somewhere between 5 and 10-year contracts of small numbers.

Speaker #7: The balance would be come from cash flow which is, again, the 70% would come from cash flow from the company and corporate debt, and that would be we may look at, depending on the size of the project and the partners involved, taking on potentially minority infrastructure partners alongside us in some of those projects.

Speaker #7: So that's the large load. We can think about the data center, the big large load projects, or even the large load CNI, if you think about greenfield industrial projects.

Speaker #7: The smaller projects, if you think sub-$100 million, will be funded on the balance sheet. Those ones where you think about oil and gas customers, et cetera.

Speaker #7: They will be sort of maybe of shorter term, somewhere between 5 and 10-year contracts of small numbers. And as you see, you know, some of our larger projects, you know, we may well do within, you know, with our other partnership, technology partnerships, and as we see, you may have multiple technologies in there as evidenced by our outflow partnership.

Michael Stock: As you see, some of our larger projects, we may well do within our other partnership technology partnerships. As we see, you may have multiple technologies in there, as evidenced by our Oklo partnership. That is in the future in the 2030s, but that will also potentially be part of it as well. There will be a lot of details around each of these projects that will come out when we make the announcements.

Speaker #7: You know, that is in the future in the 2030s, but that will also potentially be part of it as well. So there will be a lot of details around each of these projects that will come out when we make the announcements.

Speaker #6: Yep. That's very helpful. Thank you, Michael. The other question I had was on, we've heard some of the other participants in sort of mobile energy support for data centers talk about transient response, and you guys mentioned it in your press release.

[Analyst]: Yep. That's very helpful. Thank you, Michael. The other question I had was on we've heard some of the other participants in sort of mobile energy support for data centers talk about transient response, and you guys mentioned it in your press release. These other participants have said that there's certain technology advantages that they have around satisfying that need. Can you talk about how Liberty plans to handle that and maybe just educate us a little bit about what the transient response involves?

Speaker #6: These other participants have said that there are certain technology advantages that they have around satisfying that need. Can you talk about how Liberty plans to handle that and maybe just educate us a little bit about what the transient response involves?

Speaker #4: Well, we won't get into the absolute details there, Mark. Certainly, we're working on some thoughtful and, I'd say, maybe somewhat proprietary solutions around that.

Ron Gusek: We won't get into the absolute details there, Mark. Certainly, we're working on some thoughtful and I'd say maybe somewhat proprietary solutions around that. I would tell you that our electrical engineering team has been working very, very closely with our partners in that space around a very specific solution to that. That solution is tailored specifically to the generation assets that we will be deploying to any given individual project. Of course, as you can appreciate, a large reciprocating engine behaves slightly differently than a smaller reciprocating engine, behaves slightly differently than a gas turbine. As you consider being able to respond to transient loads in each of those environments, you need to have a solution that is tailor-made to that. We're confident that our engineering team, together with those partners, have a fantastic solution that meets those needs. We're comfortable with how we're moving forward there.

Speaker #4: But I would tell you that our electrical engineering team has been working very, very closely with our partners in that space around a very specific solution to that.

Speaker #4: And that solution's tailored specifically to the generation assets that we will be deploying to any given individual project. So, of course, as you can appreciate, a large resource behaves slightly differently than a smaller resource, which behaves slightly differently than a gas turbine.

Speaker #4: And so, as you consider being able to respond to transient loads in each of those environments, you need to have a solution that is tailor-made to that.

Speaker #4: And so we're confident that our engineering team, together with those partners, have a fantastic solution that meets those needs. So we're comfortable with how we're moving forward there.

Speaker #6: Yeah, and one thing I might clarify there, Mark, just a little bit. I wouldn't characterize it as mobile power. I think sort of that's a leftover from a couple of years ago.

Michael Stock: One thing I might clarify there, Mark, just a little bit. I wouldn't characterize it as mobile power. I think that's a leftover from a couple of years ago. There is some mobile power we use for frac. There will be some version of mobile power that we will use for, think about data hall commissioning or special power boosting when needed, when you're kind of doing an expansion on a site-specific project. This is in-situ power, permanently in place, doing permanent power generation. I would say I think you need to kind of think about that differently from the generator intercom companies. This is truly pure power generation.

Speaker #6: You know, there are some mobile power solutions that we use for frac. There will be some version of mobile power that we will use for things like data hall commissioning or special power boosting when it's needed, especially when you're doing an expansion on a site-specific project.

Speaker #6: But this is in-situ power, permanently in place, doing permanent power generation. So I would say, I think you need to kind of think about that differently from the sort of, you know, the generator into companies.

Speaker #6: This is truly pure power generation. Yep. Great. Thanks so much. I'll turn it back.

[Analyst]: Great, thanks so much. I'll turn it back.

Speaker #4: Thanks, Mark.

Ron Gusek: Thanks, Mark.

Speaker #1: Our next question comes from Scott Gruber with Citigroup. Please go ahead.

Anjali Voria: Our next question comes from Scott Gruber with Citi Group. Please go ahead.

Speaker #7: Yes, good morning. Michael, I'm trying to get a little, good morning. I want to get a little more details just around the capex buildup for next year with the additional megawatts coming in.

[Analyst]: Yes, good morning. I want to get a little more details just around the capex buildup for next year with the additional megawatts coming in. I assume that the base business is kind of down towards maintenance capex. Maybe if you can give us some additional color on the building blocks of that $26 million capex figure.

Speaker #7: I assume that the base business, you know, kind of down towards maintenance capex. And then, if you can give us some additional color on the building blocks or the 2026 capex figure.

Speaker #6: Yeah. As obvious, so yeah, we always give you the details in the January call, and we'll give you the buildup and then kind of update that guidance as we go through it.

Michael Stock: Yeah. As obvious, so yeah, we always give you the details in the January call, and we'll give you the buildup and then kind of update that guidance as we go through it. We're expecting to have approximately 500 megawatts. If you look through the end of the year, some of that will be landing towards the end of the year, that will just be the package generation, but a significant portion of it will be with installation. I think you can use sort of a variation around, if you just think about installed generation, around about $1.5 million, $1.6 million a megawatt. If you think of sort of long lead and generators at around $1.1 million. It'll be a balance of that. We'll give you an updated view of that in January as we go through.

Speaker #6: But yeah, we're expecting to have approximately 500 megawatts. If you look through the end of the year, some of that will be landing towards the end of the year. Then we'll just be the package generation, but a significant portion of it will be with installation.

Speaker #6: So I think, you know, you can use sort of a variation around just think about installed generation of about 1.5 to 1.6 million megawatts.

Speaker #6: If you think of sort of long lead and generators at around $1.1 million, so it'll be a balance of that, and we'll give you an update of view of that in January.

Speaker #6: As we go through, we'll give you, probably I'd say, expect in January, a bit more of a longer-term look at our current views on future cash flows in the power business.

Michael Stock: I'd say expect in January a bit more of a longer-term look on our current views on future cash flows in the power business. We'll probably take a little bit of a longer view on how we talk to the street by January on that part of the business.

Speaker #6: Yeah, we'll probably take a little bit of a longer view on how we talk to the street by January on that part of the business.

Speaker #7: Okay. Well, can I speak to my next question? I was going to ask you to provide some color just on the, you know, EBITDA payback on the contracts you're seeing. You know, if it's kind of $15-ish on CapEx per megawatt, you're still thinking we're kind of in that 3 to 4-year payback, you know, on that investment?

[Analyst]: Okay. That kind of speaks to my next question. I was going to ask if maybe you could provide some color just on the EBITDA payback on the contracts you're seeing. You know, if it's kind of $1.5 million-ish on CapEx per megawatt, are you still thinking we're kind of in that three to four-year payback on that investment?

Speaker #6: So, so Scott, it obviously depends on the term of the contract. When you're thinking about longer-lived contracts with investment-grade clients in the 15-plus years, obviously, you know, you're going to have a longer cash-on-cash payback to achieve. You know, our target is a return profile of unlevered cash return in sort of the high teens.

Michael Stock: Scott, it obviously depends on the term of the contract. When you're thinking about longer live contracts with investment-grade clients in the 15-plus years, you know you're going to have a longer cash-on-cash payback to achieve. Our target is return profile of an unlevered cash return in sort of the high teens, right? You're probably talking five, five and a bit on that. Shorter-term contracts will be a quicker payback. If you're doing shorter-term contracts in the five to seven years for a smaller oil and gas implementation, you'll be on the three-plus year, the three-year version of that. The longer live contracts, you know you're going to have a longer payback period. Much more secure, and it's going to be cash-on-pay ESAs.

Speaker #6: Right? So, you know, you're probably talking, you know, $5 million, $5 million and a bit, on that. Shorter-term contracts, obviously, will be, you know, a quicker payback.

Speaker #6: So, you know, if you're doing shorter-term contracts in the 5 to 7 years for a, you know, a smaller oil and gas implementation, yeah, you'll be on the, you know, the 3 plus year, the 3-year version of that.

Speaker #6: But the longer-life contracts, obviously, you know, you're going to have a longer payback period. But much more secure, and it's going to be tackled by ESAs.

Speaker #7: I gotcha. If I could sneak one more in, is there a tension today between kind of reserving some capacity for larger data center contracts and kind of not wanting to dedicate, you know, that capacity to some other end markets? Or is the data center opportunity moving so quickly that you guys don't really feel a tension in terms of dedicating capacity at this juncture?

[Analyst]: I gotcha. If I could sneak one more in, is there a tension today between kind of reserving some capacity for larger data center contracts and kind of not wanting to dedicate that capacity to some other end markets, or is the data center opportunity moving so quickly that you guys don't really feel a tension in terms of dedicating capacity at this juncture?

Speaker #6: There is significant tension around reserving capacity. Near-term generation capacity and near-term generation need are very high. However, near-term generation capacity is nowhere near what's available in the market.

Michael Stock: There is significant tension around reserving capacity. Near-term generation capacity, near-term generation need is very high. Near-term generation capacity is nowhere near what's available in the market, so there is significant tension around that.

Speaker #6: So, there is significant tension around that.

Speaker #7: Interesting. Okay. I'll take it back. Thanks for the thoughts.

[Analyst]: Interesting. Okay, I'll take it back. Thanks for the thoughts.

Speaker #1: Our next question comes from Audie Modak with Goldman Sachs. Please go ahead.

Anjali Voria: Our next question comes from Adi Modak with Goldman Sachs. Please go ahead.

Speaker #8: Hi, good morning, team. Ron.

Steven Gengaro: Hi, good morning, team. Ron, you mentioned it's taking longer to sign some of these power contracts because the market is different. Can you help us think through the steps that you are looking at to sign these contracts so that we understand it?

Speaker #4: Good morning, Audie.

Speaker #8: Ron, you mentioned it's taking longer to find some of these power contracts because the market is different, but can you help us think through the steps that you are looking at to sign these contracts so that we understand it?

Speaker #4: Yeah, and I think there are a number of them. Of course, these are big projects. These are billions and billions and billions of dollars of investment that are going into the ground there.

Ron Gusek: Yeah. I think there's a number of them. Of course, these are big projects. These are billions and billions and billions of dollars of investment that are going into the ground there. As you think about all the pieces that have to come together there, it's not an insignificant number. In our oilfield services world, you have an E&P that's already locked up land. They've done their geology work, and they're drilling wells in a pretty straightforward cadence. They have a pretty clear outlook to that. In this case, you're talking about a series of parties that have to come together, identify the land, take care of air permitting, fiber, fuel source in the form of natural gas, and end use. If you're a hyperscaler, the end-use contract with the customer that's going to co-locate in that facility.

Speaker #4: And so, as you think about all the pieces that have to come together, it's not an insignificant number. In our oil field services world, you have an E&P that's already locked up land, they've done their geology work, and they're drilling wells. You know, pretty straightforward cadence.

Speaker #4: And so, they have a pretty clear outlook to that. In this case, you're talking about a series of parties that have to come together to identify the land, take care of air permitting, fiber, fuel source in the form of natural gas, and end use. If you're a hyperscaler, the end-use contract with the customer that's going to co-locate in that facility.

Speaker #4: So, you have to have a number of these pieces that all come together. Ultimately, when all of those are satisfied, then they get comfortable signing the final Energy Services Agreement with us.

Ron Gusek: You have to have a number of these pieces that all come together. Ultimately, when all of those are satisfied, they get comfortable signing the final energy services agreement with us. They are somewhat long in the making. I would say we get to clarity around what the end result is going to look like sooner than that. That doesn't mean you're at a firm contract at that point in time. We just have to work alongside of them as they work through these steps and patiently stand by until we get to a place where we can sign the final documents.

Speaker #4: And so, while they are somewhat long in the making, I would say we get to clarity around what the end result is going to look like sooner than that.

Speaker #4: But that doesn't mean you're at a firm contract at that point in time. So we just have to work alongside them as they work through these steps and patiently stand by until we get to a place where we can sign the final documents.

Speaker #6: That makes a lot of sense. Thanks for the explanation there. And then, maybe for Michael, you talked about project-level financing for some of these entities.

[Analyst]: That makes a lot of sense. Thanks for the explanation there. Maybe for Michael, you talked about project-level financing for some of these entities. Would you consider equity or any kinds of converts as potential tools in the mix?

Speaker #6: Would you consider equity or any kinds of converts as potential tools in the mix? So obviously, Audie, you know we are always looking for the most cost-effective and the most efficient way to finance the growth of this company to drive the highest value for our investors.

Michael Stock: Obviously, Adi, we are always looking for the most cost-effective and the most efficient way to finance the growth of this company to drive the highest value for our investors. As we would say, nothing is necessarily off the table. We have, I believe, a very, very clear path to being able to fund a large portion of these projects without major dilution.

Speaker #6: So, as we would say, you know, nothing is necessarily off the table. But we have, I believe, a very, very clear path to being able to fund a large portion of these projects without major dilution.

Speaker #8: Got it. Thank you so much. Thanks, guys.

[Analyst]: Got it. Thank you so much. Thanks, guys.

Speaker #4: Thanks, Audie.

Ron Gusek: Thanks, Adi.

Speaker #1: Our next question comes from Saurabh Pant from Bank of America. Please go ahead.

Anjali Voria: Our next question comes from Surab Pont from Bank of America. Please go ahead.

Speaker #8: Hi, good morning, Ron and Mike.

Michael Stock: Hi, good morning, Ron and Mike.

Speaker #4: Good Good morning.

Ron Gusek: Good morning.

Speaker #8: Ron, Mike, it sounds like you're making a lot of good progress on the power side of things. And maybe kind of a follow-up on what Audie just asked about the contracts, right?

[Analyst]: Surab.

Michael Stock: Ron, Mike, it sounds like you're making a lot of good progress on the power side of things. Maybe kind of a follow-up on what Adi just asked on the contracts, right? How you're thinking about those contracts. These are very different from what not just you, what we are used to, right? We are trying to figure out how are you looking at potential risks and pitfalls and liabilities, all of that good stuff, right? Maybe just a little bit of color, 15-year, maybe north of 15-year contracts. How do you protect yourself from that risk? I know the opportunity is fantastic, right? I'm just weighing up both sides of the equation. The first way that you look at it is who's your counterparty there, Surab.

Speaker #8: How are you thinking about those contracts? These are very different from what we, not just you, are used to, right? So we are trying to figure out how you are looking at potential risks, pitfalls, and liabilities, right?

Speaker #8: All of that good stuff, right? So maybe just a little bit of color—15-year, maybe north of 15-year contracts—how do you protect yourself from that risk?

Speaker #8: I know the opportunity is fantastic, right? But I'm just weighing up both sides of the equation.

Speaker #6: Right. So, you know, the first way that you look at it is who's your counterparty? That's Saurabh. So, okay, you're looking at, you know, even though let's just say 70% of the sort of data market that's going to be built is probably, you know, 6 or 7 large investors, very, very large investment-grade clients, right?

Michael Stock: You're looking at, even though let's just say 70% of the sort of data market that's going to be built is probably six or seven large, very, very large investment-grade clients, right? The other 30% is more the multiple users, the banks, the BFAs, the JPMorgans, the smaller companies in the world. Just a joke. Those sort of things are going to be large investment-grade offtake. Your ESA is with that large investment-grade offtake. You're doing it in conjunction with a company, these very large developers who build the data centers and run them as a REIT. You choose your counterparty on that side very closely, somebody who's got an execution history, the ability to put the buildings on the ground in a reasonable timeframe, right?

Speaker #6: The other 30% is more about the multiple uses: the banks, you know, sort of, you know, the BFAs, the JP Morgans, the smaller companies in the world.

Speaker #6: Just a joke. But those sort of say you've got a large investment-grade offsite, and so your ESA is with that large investment-grade offtake.

Speaker #6: You're doing it in conjunction with a company. You know, these very large developers who build the data centers and run them as a REIT.

Speaker #6: So you choose your counterparty on that side very closely. Somebody who's going to have execution history, the ability to put the buildings on the ground in a reasonable timeframe, right?

Speaker #6: Then you've got to look at, obviously, you've got an engineering effort on your own, making sure you understand your solutions, make you understand the delivery of your supply chain, and your EPC partner that is executing on that to make sure that you are not running in, that you set a reasonable time schedule, you have no issues around delays around LDs.

Michael Stock: You've got to look at, obviously, you've got an engineering effort on your own, making sure you understand your solutions, make sure you understand the delivery of your supply chain and your EPC partner that is executing on that to make sure that you are not running in, that you set a reasonable time schedule, you have no issues around delays, around LDs. It's an engineered solution, making sure that you're building, let's just say, 1.2, 1.3x to get you your 5.9s, which we can do with the smaller resets, and your comfort level around being able to deliver that IT load that they need. It's all of that, managed by the team here, rolling up into a risk committee that's reviewed on every single project. That balance of that is what protects you.

Speaker #6: It's an engineered solution, making sure that you are building, let's just say, 1.2 to 1.3 times to get you into your 5.9s, which we can do with the smaller recents.

Speaker #6: And your comfort level around being able to deliver that IT load that they need. So it's all of that, you know, managed by the team here, rolling up into a risk committee.

Speaker #6: There's a review on every single project, and that balance of that is what protects you. Now, each one of these large-load projects will be rolled down into a separate project code.

Michael Stock: Each one of these large load projects will be rolled down into a separate project code, as I said, with non-recourse debt that'll have specific, or just like you do with any other large real estate development, with the corporate protections around that. It's a very different setup from our current business, but we've thought through all that very, very carefully.

Speaker #6: You know, as I said, with non-recourse debt, that'll have, you know, specific or just like you do with any other large real estate development, with the corporate protections around that.

Speaker #6: So it's a very different setup from our current business, but we have thought through all that very, very carefully.

Speaker #8: Okay. Okay. No, that's a fantastic color, Mike. We'll keep an eye out on how things evolve. But it's one of the things, Ron, Mike, whoever wants to take this on the technology side of things, right?

[Analyst]: Okay. No, that's fantastic, Kellan Mike. We'll keep an eye out on how things evolve. It's one other thing, Ron Mike, whoever wants to take this, on the technology side of things, right? When we were talking about 400 megawatts, that was supposed to be all nat gas resets, right? Now that we are over one gigawatt, this is not the end, by the way, right? I'm sure you would look at more opportunities. How are we looking at the technology side of things evolving between resets and turbines and maybe a little bit of a battery to supplement all of that, right? How are we thinking about that? Just the lead time to order that and get that in time?

Speaker #8: When we were talking about 400 megawatts, that was supposed to be all NatGas recent, right? But now that we are over one gigawatt—and again, this is not the end, by the way, right?

Speaker #8: I'm sure you would look at more opportunities. How are we looking at the technology side of things evolving between recent trends in turbines, and maybe a little bit of battery to supplement all of that, right?

Speaker #8: How are we thinking about that? And then just the lead time to order that and get it in time?

Speaker #4: That's a very good question. I would say that we've always said that recents are going to form the core of our technology platform.

Ron Gusek: That's a very good question. I would say that I think we've always said resets are going to form the core of our technology platform, that we recognize there are going to be cases where other technologies will make a lot of sense in concert with those or maybe in place of those. I would tell you today that of the capacity we are procuring, the large majority of that remains gas reciprocating engines. We like that technology, and we believe it brings some inherent benefits to the table, particularly around heat rate. That said, when it comes to power density, you get some real benefits from a gas turbine. We absolutely see those as part of the puzzle.

Speaker #4: We recognize that there are going to be cases where other technologies will make a lot of sense, either in concert with those or maybe in place of those.

Speaker #4: So I would tell you today that of the capacity we are procuring, the large majority of that remains gas reciprocating engines. We like that technology and we believe it brings some inherent benefits to the table.

Speaker #4: Particularly around heat rate. But that said, when it comes to power density, you get some real benefits from a gas turbine. And so we absolutely see those as part of the puzzle.

Speaker #4: And then, as you think down the road, you know the end-use parties that are going to be consuming these electrons, or at least the vast majority of them.

Ron Gusek: As you think down the road, you know the end-use parties that are going to be consuming these electrons, or at least the vast majority of them, and they all have publicly stated goals around reducing the carbon intensity of their electricity. We have some very specific partnerships around that, particularly the Oklo Inc. partnership. We will, sometime into the next decade, be able to bring small modular nuclear to the table. We see that being a piece of the puzzle as well. In the nearer term, recognizing that emissions can be a challenge, particularly in non-attainment areas. We've talked about the Colorado Air and Spaceport as an example. The Front Range of Colorado is a non-attainment area and requires some very specific solutions to ensure we can achieve the emissions caps that are necessary there. Fuel cells offer a great partnership together with gas reciprocating to help accomplish that.

Speaker #4: And they all have publicly stated goals around reducing the carbon intensity of their electricity. We have some very specific partnerships around that, particularly the Oklo partnership.

Speaker #4: We will sometime into the next decade be able to bring small modular nuclear to the table. And so we see that being a piece of the puzzle as well.

Speaker #4: In the nearer term, recognizing that emissions can be a challenge—particularly in non-attainment areas—we've talked about the Colorado Air and Space Port as an example.

Speaker #4: The Front Range of Colorado is a non-attainment area and requires some very specific solutions to ensure we can achieve the emissions caps that are necessary there.

Speaker #4: Fuel cells offer a great partnership together with gas resources to help accomplish that. So you can expect, as we talk about these projects in the future, likely a mix of generation technologies that are best suited to address the needs of that particular site.

Ron Gusek: You can expect, as we talk about these projects in the future, likely a mix of generation technologies that are best suited to address the needs of that particular site.

Speaker #8: Okay, fantastic, Ron. I'm glad we are talking about the next decade and not the next quarter. But thank you for the color, Ron. I'll turn it back.

[Analyst]: Okay. Fantastic, Ron. I'm glad we are talking about the next decade and not the next quarter. Thank you for the color, Ron. I'll turn it back.

Speaker #4: Awesome. Thanks so much.

Ron Gusek: Awesome. Thanks so much.

Speaker #1: Thank you. Our next question is from Tom Curran with Seaport Research. Please go ahead.

Anjali Voria: Our next question is from Tom Curran with Seaport Research. Please go ahead.

Speaker #8: Good morning. Sticking with the Power as a Service business here, for the initial 100 megawatts of capacity being delivered this quarter, Q4, would you please review the deployment timeline and its major stages?

Michael Stock: Good morning. Sticking with the power as a service business here, for the initial 100 megawatts of capacity being delivered this quarter, Q4, would you please review the deployment timeline and its major stages? Are you still anticipating about six months from equipment delivery to first revenue out in the field? Do you anticipate opportunities to maybe shorten that timeline as you ascend the learning curve? I'll take this one. It depends on the technology. Generally, from package resets to electron generation, six months is a good sort of average number. When you move up the scale onto the turbine side of the world, you probably take that to maybe all the larger resets, which will be in large power halls. That's probably nine months from generation to electrons.

Speaker #8: Are you still anticipating about six months from equipment delivery to first revenue out in the field? And, do you anticipate opportunities to maybe shorten that timeline as you work through the learning curve?

Speaker #6: So, I'll take this one. It depends on the technology. Generally, from package recents to electron generation, six months is a good sort of average number.

Speaker #6: You know, when you move up the scale onto the turbine side of the world, you probably take that to maybe all the larger recent, which will be large power halls. That's probably nine months.

Speaker #6: From generation to electrons, now you can, depending on where the project is, some of these large projects are going to be interesting. Because that's sort of an average, as you will be doing sort of the dirt work and the building and sort of landing the generation.

Michael Stock: You can, depending on where the project is, some of these large projects are going to be interesting because that's sort of an average, as you'll be doing the dirt work and the building and landing the generation. Some of the early generation will have a longer time to revenue generation, and some of the later engines that get installed will have a shorter time. Just talking in general averages, and I think that's a fairly reasonable, it's going to be project and site-specific around that, around on average over the next five years. Got it. Liberty not only has a well-deserved, consistently earned stellar reputation as a stored capital, but I would argue on the technology side, as you know, frequently the smartest guys in the room, trailblazers on innovation and technology adoption. I don't want to unfairly highlight one that didn't work out here.

Speaker #6: So, some of the early generation will have a longer time to revenue generation, and some of the later engines that get installed will have a shorter time.

Speaker #6: So, just talking in general averages—and I think that's fairly reasonable; it's going to be project- and site-specific around that—on average, over the next five years.

Speaker #8: Got it. And then you

Speaker #6: Liberty not only has a well-deserved, consistently earned dollar reputation as a sort of capital, but I would argue on the technology side, as you know, frequently the smartest guys in the room, you know, trailblazers on innovation and technology adoption.

Speaker #6: I don't want to unfairly highlight one that didn't work out here, but when it comes to Natron, you know, obviously you nailed it with being ahead of the curve on advanced nuclear and the Oklo relationship, as well as on enhanced geothermal and turbo.

Michael Stock: When it comes to Natron, obviously, you nailed it with being ahead of the curve on advanced nuclear and the Oklo relationship, as well as on enhanced geothermal and turbo. Natron hasn't worked out. Ron, I'd just be curious to hear, when it comes to long-duration energy storage and that longer-term potential for where you might go with batteries as part of LPI's DPS fleet, how are you thinking about sodium ion technology? Do you still think that's going to be one of the likely longer-term winners, or are you maybe pivoting to other electrochemical technologies when it comes to batteries?

Speaker #6: Natron hasn't worked out. Ron, I'd just be curious to hear, when it comes to long-duration energy storage and that longer-term potential for where you might go with batteries as part of LPIs and the DPS fleet.

Speaker #6: How are you thinking about sodium-ion technology? Do you still think that's going to be one of the likely longer-term winners, or are you maybe pivoting to other electrochemical technologies when it comes to batteries?

Speaker #4: Yeah, good question. I would say that as far as the technology itself goes, I'm still a big fan of sodium-ion technology. If you think about things like the C rating and potential cycle count for a sodium-ion battery, it's just awesome technology in that regard.

Ron Gusek: Yeah, good question. I would say that as far as the technology itself goes, still a big fan of sodium ion technology. If you think about things like the C rating and potential cycle count for a sodium ion battery, it's just awesome technology in that regard. You can dump charge into and remove charge from those batteries at rates that are hard to match with some other technologies. The total cycle count or lifespan for one of those batteries is meaningfully higher than for lithium-based technologies. We really do like the technology. Unfortunate, the Natron situation that they just couldn't get to scale, but we'll still continue to watch for that technology to be deployed. Of course, we use a lot of battery capacity in our world today. That's present in our Digi world, both on the DigiPrime Hybrid Frac System fleets and on the Digi frac locations.

Speaker #4: You can dump charge into and remove charge from those batteries at rates that are hard to match with some other technologies. And the total cycle count or lifespan for one of those batteries is meaningfully higher than for lithium-based technologies.

Speaker #4: So we really do like the technology. Unfortunately, the Natron situation, they just couldn't get to scale, but I will still continue to watch for that technology to be deployed.

Speaker #4: Of course, we use a lot of battery capacity in our world today. That's present in our Digi World, both on the Digi Prime fleets and on the Digi Frack locations.

Speaker #4: We rely on lithium-based technologies there because you have a weight consideration that comes into play. You don't get the same energy density out of a sodium-based chemistry as you do out of a lithium-based chemistry.

Ron Gusek: We rely on lithium-based technologies there because you have a weight consideration that comes into play. You don't get the same energy density out of a sodium-based chemistry as you do out of a lithium-based chemistry. When weight and size are a factor, there's a reason lithium technology is the technology of choice in EVs, for example. The same is true for us. We have size and space considerations when it comes to deploying batteries on our frac locations. We've leaned towards lithium technologies there. We're familiar with those. We have strong partnerships there. We'll continue to leverage those partnerships as necessary, both on the core OFS space and in the power space to the case that that makes sense. We'll continue to keep an eye on those other technologies for future opportunities as well.

Speaker #4: And so, when weight and size are a factor, there's a reason lithium technology is the technology of choice in EVs, for example. And the same is true for us.

Speaker #4: Of course, we have size and space considerations when it comes to deploying batteries on our frac locations. And so we've leaned towards lithium technologies there.

Speaker #4: We're familiar with those. We have strong partnerships there, and we'll continue to leverage those partnerships as necessary, both in the core OFS space and in the power space, to the extent that it makes sense.

Speaker #4: But we'll continue to keep an eye on those other technologies for future opportunities as well.

Speaker #6: Very helpful. I appreciate your taking my questions. Thanks a lot.

Michael Stock: Very helpful. I appreciate your taking my questions.

Speaker #4: Thanks, Tom.

[Analyst]: Thanks a lot.

Ron Gusek: Thanks, Tom.

Speaker #1: Our next question comes from Jeff LeBlanc with Tudor Pickering Holt. Please go ahead.

Anjali Voria: Our next question comes from Jeff LeBlanc with Tudor Pickering Holt. Please go ahead.

Speaker #9: Good morning, Ron and team. Thank you for taking my question. Thank you.

[Analyst]: Good morning, Ron and team. Thank you for taking my question.

Speaker #4: Morning, Jeff.

Ron Gusek: Morning, Jeff.

Speaker #9: You. I was just curious how we should think about capital allocation between frac and LPI moving forward. We know that you previously mentioned that the base cases were no Digi Builds in 2026.

[Analyst]: Thank you. I was just curious, how should we think about capital allocation between frac and LPI moving forward? We know that you previously mentioned that the base cases were no DigiPrime bills in 2026. Given the compelling opportunity in power, is there any reason this shouldn't be the case moving forward if frac prices stay at the current levels?

Speaker #9: But given the compelling opportunity in power, is there any reason this shouldn't be the case moving forward if frac prices stay at the current levels?

Speaker #6: Our frac business is an incredibly vibrant and great business that has strong long-term cash generation ability over the next decade. So we invest in that business, as we always have, and as we always will, based on the timing of the site.

Michael Stock: Our frac business is an incredibly vibrant and great business that has great long-term cash generation ability over the next decade. We invest in that business, as we always have and as we always will, on the basis and the timing of the cycle for that business. That won't be affected at all by investments in our power business. We are not going to be capital limited as far as investments in these two businesses. They stand alone, and we will invest as makes sense for our future cash generation abilities.

Speaker #6: For that business, and that won't be effective at all by investments in our power business. You know, we are not going to be capital limited as far as investments in these two businesses.

Speaker #6: They stand alone, and we will invest as makes sense for our future cash generation abilities.

Speaker #9: Yeah, that makes sense. Thank you very much. I'll hand the call back to the operator.

[Analyst]: Yep. That makes sense. Thank you very much. I'll hand the call back to the operator.

Speaker #1: Our next question comes from Derek Podhazer with Piper Sandler. You may go ahead.

Anjali Voria: Our next question comes from Derek Podhazer with Piper Sandler. You may go ahead.

Speaker #8: Hey, good morning. I just wanted to go back to Saurabh's question and maybe clarify the answer. On just the type of equipment that you'll be ordering and delivering, I know initially it was the 400 megawatts.

[Analyst]: Hey, good morning. I just wanted to go back to Surab's question and maybe clarify the answer on just the type of equipment that you'll be ordering and delivering. I know initially it was the 400 megawatts. I think that was typically made up of the reciprocating engines, the 2.5 to 5 megawatt units. We think about the incremental 100 by the end of next year and then the 600 plus to get to over a gigawatt. I think you started mentioning we might get a mixture of type of assets, but can you be more specific if you will continue to invest in the reciprocating engines and then if you are moving towards the turbines? Maybe how much we can think about that in terms of megawatts for your deliveries?

Speaker #8: I think that was typically made up of the recents, the 2.5 to 5 megawatt units. And then we think about the incremental 100 by the end of next year, and then, you know, the 600-plus to get to over a gigawatt.

Speaker #8: I think you started mentioning we might get a mixture of types of assets, but could you be more specific if you will continue to invest in the recent, and if you are moving towards the turbines, maybe how much we can think about that in terms of megawatts for your deliveries?

Speaker #4: So, Derek, I would say that the vast majority of this incremental capacity is also gas-related. Turbines will play a role in our world.

Ron Gusek: Derek, I would say that the vast majority of this incremental capacity is also gas reciprocating. Turbines will play a role in our world, although I think as we continue to look forward, we will still lean very heavily on the gas reciprocating technology. If you think about, and I've said this in past calls, ensuring long-term durability in the business, bringing the best technology to the table in support of our customers. We like reciprocating because of the heat rate. You have an opportunity under simple cycle conditions to deliver conversion of molecules to electrons at a level that is on par with the grid today at about 45% thermal efficiency. That is impossible to achieve with a simple cycle turbine. You're going to, right out of the gate, put yourself at a disadvantage with respect to fuel burn per electron delivered.

Speaker #4: Although I think as we continue to look forward, we will still lean very heavily on the gas recent technology. If you think about, and I've said this in past calls, ensuring long-term durability in the business and bringing the best technology to the table in support of our customers, we like recent because of the heat rate.

Speaker #4: You have an opportunity under simple cycle conditions to deliver conversion of molecules to electrons at a level that is on par with the grid today at about 45% thermal efficiency.

Speaker #4: That is impossible to achieve with a simple cycle turbine. You're going to write out of the gate, putting yourself at a disadvantage with respect to fuel burn per electron delivered.

Speaker #4: And so, while we believe there is an important place for turbines in the power generation world, we've talked about density as one of those attributes.

Ron Gusek: While we believe there is an important place for turbines in the power generation world, we've talked about density as one of those attributes. We really like the gas reciprocating technology, and you should expect to see that be a very meaningful part of our portfolio today, tomorrow, and in the years to come.

Speaker #4: We really like the gas recent technology, and you should expect to see that be a very meaningful part of our portfolio today, tomorrow, and in the years to come.

Speaker #8: That's helpful. And maybe just to clarify on that, is there any larger recent acquisition that you can go out and acquire? I mean, I know the 2.5 to 5, but are there 10-megawatt-plus type of acquisitions out there that you can put into your portfolio?

[Analyst]: That's helpful. Maybe just to clarify in that, is there any larger resets that you can go out and acquire? I mean, I know the two and a half to five, but 10 megawatt plus type of resets out there that you can put into your portfolio?

Speaker #4: Yes, there absolutely are. So, if you think about our portfolio going forward, it is going to be centered around the Yenbacher unit, which is 4.3 to 4.4 megawatts.

Ron Gusek: Yes, there absolutely are. If you think about our portfolio going forward, it is going to be, we're going to have capacity centered around the Yenboker unit, which is 4.3, 4.4 megawatts per unit. You absolutely can get much bigger gas reciprocating engines in that. Michael mentioned the idea of a power hall. The Yenbokers are a packaged unit, something that we package and deliver to site, basically ready to go, say for some basic dirt work. As you start to move into that larger capacity, the 10, 11, 12 megawatt kind of size, those are very, very large units. Those are going to be inside of a power hall, a building that will be constructed on site, and then we'll have those installed in there.

Speaker #4: Per unit, but you absolutely can get much bigger gas recent engines in that. Michael mentioned the idea of a power hall. The Yenbachers are a packaged unit, something that we package and deliver to site, basically ready to go, safe for some basic dirt work.

Speaker #4: As you start to move into that last larger capacity, the 10, 11, 12 megawatt kind of size, those are very, very large units. Those will be inside of a power hall, a building that will be constructed on site, and then we'll have those installed in there.

Speaker #4: And so, as he was alluding to, the different timelines from delivery to power generation were specifically around those two different asset scales that he was talking about.

Ron Gusek: As he was alluding to the different timelines from delivery to power generation, it was specifically around those two different asset scales that he was talking. You should expect to see both that smaller, more modular type approach in our world, along with the larger units deployed in a power hall type facility also.

Speaker #4: So, you should expect to see both that smaller, more modular type approach in our world, along with the larger units deployed in a power hall type facility also.

Speaker #6: If you look at it, Derek, you're going to have power blocks basically with our partners at Caterpillar, sort of, you know, the 2.5 megawatts and 25 megawatt blocks.

Michael Stock: If you look at it, Derek, you're going to have power blocks, basically, with our partners at Caterpillar, sort of the 2.5 megawatt and 25 megawatt blocks. You're going to have the larger Jenbachers in 50 megawatt blocks to deliver. Then we'll have the 200 megawatt power hall, which is delivered by a number of our core partners for these larger reciprocating engines. As you go up in size after that, if it's any very, very large installations, that's when, as Ron pointed out, you might go to a larger scale turbine solution, as well as waiting for the Oklo powerhouses, which would be our natural sort of large scale behind the reciprocating engines once we get past 2030. Once into 2030, that'll be the solution there.

Speaker #6: You're going to have the larger Yenbachers and 50-megawatt blocks to deliver. Then we'll have the 200-megawatt power hall, which is delivered by a number of our core partners for these larger recent engines.

Speaker #6: And then, as you'd go up in size after that, if it's any very large installations, that's when, as Ron pointed out, you might go to a larger scale turbine solution, as well as waiting for the Oklo powerhouses, which would be our natural sort of large-scale behind the recents.

Speaker #6: Once we get past 2030. Once into 2030, that'll be the solution there.

Speaker #9: Right. Okay, that makes sense. Very helpful detail. And I guess for those power halls, those bigger recent projects, are those included in this one gigawatt target that you just laid out?

[Analyst]: Right. Okay, that makes that very helpful detail. I guess for those power halls, those bigger resets, are those included in this one gigawatt target that you just laid out?

Speaker #6: We're not going to go into the details of exactly what it is, but you know, they are basically all recent updates for the net 1 gigawatt number.

Michael Stock: We're not going to enter the details of exactly what it is, but you know they are basically all resets within that one gigawatt number.

Speaker #9: Got it. Okay, that's fair. And then I'm going to turn the question and then ask on power. So just maybe a housekeeping one for me.

[Analyst]: Got it. Okay. That's fair. I'm going to turn the question and ask on power. Just maybe a housekeeping one for me as far as how we should think about the fourth quarter. Obviously, we have some seasonality creeping in. Third quarter was much softer than expected. How should we think about maybe top line and some of the decrementals? Should we stay at that 55% level, or should we start to normalize just given kind of where we started in Q3 and where we're going in Q4?

Speaker #9: As far as how we should think about the fourth quarter, obviously we have some seasonality creeping in. The third quarter was much softer than expected.

Speaker #9: But how should we think about, you know, maybe top line and some of the decrementals? Should we stay at that 55% level, or should we start to normalize just given kind of where we started in Q3 and where we're going in Q4?

Speaker #4: Derek, I would say that at this point in time, we're anticipating just typical seasonality, as really the change in cadence from Q3 to Q4.

Ron Gusek: Derek, I would say that at this point in time, we're anticipating just typical seasonality as really the change in cadence from Q3 to Q4. We'll see how that plays out as the quarter unfolds, but that's what we're assuming at this point in time.

Speaker #4: We'll see how that plays out as the quarter unfolds, but that's what we're assuming at this point in time.

Speaker #8: Got it. Very helpful. I'll turn it back. Thank you.

[Analyst]: Got it. Very helpful. I'll turn it back. Thank you.

Speaker #6: Thanks, Derek.

Michael Stock: Thanks, Derek.

Speaker #1: Our next question is from Keith Mackey with RBC Capital Markets. Please go ahead.

Anjali Voria: Our next question is from Keith Mackey with RBC Capital Markets. Please go ahead.

Speaker #9: Hi, good morning, and thanks for taking my questions.

[Analyst]: Hi, good morning, and thanks for taking my questions.

Speaker #6: Hi, Keith.

Speaker #9: The first one, morning. I first wanted to start out on that $1.5 to $1.6 million per megawatt number. I think we'd been incorporating something slightly lower than that in the $1.3 to $1.4 range previously.

Michael Stock: Hi, Keith.

[Analyst]: The first one is, good morning. First wanted to start out on that $1.5 to $1.6 million per megawatt number. I think we've been incorporating something slightly lower than that in the $1.3 to $1.4 million range previously. Can you just talk about kind of what has driven the increase there? Is it varying scope of the equipment you'll be providing around these projects, or is it pricing, or is it a mix of both? Just curious what's really driven that. Ultimately, how close do you think we are to the end stage determination of what these projects will actually cost once they get into the field? Is that $1.5 to $1.6 million a 50% to 70% confidence number, or is it a 70% to 85% confidence number? Just curious for some clarity.

Speaker #9: Can you just talk about, you know, what has driven the increase there? Is it varying scope of the equipment you'll be providing around these projects, or is it pricing, or is it a mix of both?

Speaker #9: Just curious, what's really driven that and ultimately how close do you think we are to the, you know, to the end stage determination of what these projects will actually cost once they get into the field.

Speaker #9: Is that, you know, 1.5 to 1.6 a 50 to 70% confidence number, or is it a 70 to 85% confidence number? Just curious for some context.

Speaker #6: It sort of does depend on scope, Keith. You know, kind of material. That's us taking, you know, 13, 8 generation, stepping it up to 35 and handing the electrons off.

Michael Stock: Yeah, it sort of does depend on the scope piece, you know, kind of material. That's us taking 13A generation, stepping it up to 35 and handing the electrons off. That scope can move. Obviously, that's assuming to some degree, at some point, most of the gas delivered to the fence line, right? Depending on where, sort of how long a gas line, whose scope that's in, how long the interstate connection and the pipe. There are a lot of moving parts around where those projects can ultimately come in and whose scope that ends up in. That's why those numbers are there. There also are price increases, right? As you can see, there is a huge amount of demand for power generation. A large portion of that is built outside the country, so prices are moving on a fairly regular basis.

Speaker #6: You know, so that your scope can move. I mean, obviously, that's assuming just some degree at some point, most of the gas delivered to the fence line, right?

Speaker #6: So, you know, depending on where, you know, sort of how long a gas line, whose scope that's in, how long sort of, you know, the interstate connection and the pipe.

Speaker #6: So, a lot of moving parts around where those projects can ultimately come in, you know, and whose scope that ends up in. That's why those sort of numbers are there.

Speaker #6: There also are price increases, right? I mean, you know, as you can see, there was a huge amount of demand for power generation. A large portion of that is, you know, sort of built outside the country.

Speaker #6: You know, so, you know, sort of prices are moving on a fairly regular basis. And as, you know, when we look out, a lot of some of these prices, you know, we're starting to look at and discuss with our partners, you know, supply chains out 2028, 2029, you know, talking to the Oklo team about, you know, what we can do in 2030.

Michael Stock: As you know, when we look out at some of these prices, we're starting to look at and discuss with our partners, supply chains out 2028, 2029, talking to the Oklo Inc. team about what we can do in 2030. We are talking a long way into the future in some of those, so the pricing will move over time. The great thing is, when you look at the efficiency of our solution and the effectiveness of what we can do, and the capital effectiveness especially, we can provide what is a grid parity or lower than grid price now to these large load customers with very little inflationary need comparative to what the grid's going to go up. Capacity fee is going to probably inflate its CPI.

Speaker #6: You know, we are talking a large, you know, long way into the future in some of those. So, you know, the pricing will move over time.

Speaker #6: The great thing is, you know, when you look at the efficiency of our solution and the effectiveness of what we can do, you know, and the capital effectiveness especially, you know, we can provide what is grid parity or lower than grid price now to these large load customers with very little inflationary need comparative to what the grid's going to go up, right?

Speaker #6: You know, the capacity fee is going to kind of probably inflate at CPI. Everybody, I would say that you talk to agrees over the next 15 years the inflation rate of natural gas, given how successful we are on our completions business and how good our service teams are there.

Michael Stock: Everybody, I would say, that you talk to agrees over the next 15 years, the inflation rate of natural gas, given how successful we are on our completions activity and how good our service teams are there, is going to be far lower than the general inflation rate of grid power pricing. When customers sign up with us now, they're getting at grid or lower than grid pricing, and if they project forward 15 years, they're going to be significantly below what the grid pricing is then. It's a compelling technological and economic solution for these folks.

Speaker #6: It's going to be far lower than the general inflation rate of grid power pricing, right? So when customers sign up with us now, they're getting at grid or lower than grid pricing.

Speaker #6: And if they project forward 15 years, they're going to be significantly below what the grid pricing is then. So it's a compelling, compelling technological and economic solution for these folks.

Speaker #9: Yeah, got it. I appreciate the color on that. Maybe if I could just circle back to Derek's question about Q4 to understand the guidance there for normal seasonality, although it tends to be an industry where I find that.

[Analyst]: Yeah, got it. I appreciate the color on that. Maybe if I could just circle back to Derek's question about Q4. I understand the guidance there for normal seasonality, although it tends to be an industry where I find that.

Speaker #1: Normal seasonality is, is, is hardly normal, so we might agree.

[Analyst]: Normal seasonality is hardly normal.

Anjali Voria: We might agree.

Speaker #2: So, yeah, if we were to put, you know, just some general guideposts around that, like, if I look at the last two years, the revenue is down 12%, down 17%, in 2023 and 2024, respectively, for Q4.

[Analyst]: If we were to put, you know, just some general guideposts around that, like if I look at the last two years, the revenue is, you know, down 12%, down 17% in 2023 and 2024, respectively, for Q4. Is that sort of the range we should be thinking about for Q4 this year with kind of a similar level of decremental? Or is there anything specific in this year that might make it different from those prior years?

Speaker #2: Like, is that sort of the range we should be thinking about for Q4 this year, with kind of a similar level of decremental? Or is there anything specific in this year that might make it different from those prior years?

Speaker #3: You know, I think that's probably the topic. I think we're getting into normal seasonality, which is lower than the last two years, right?

Anjali Voria: I think that's probably the top end. I think we get into normal seasonalities, which is lower than the last two years, right? That's probably the top end of what you would model.

Speaker #3: But that's probably the top end of what you would model.

Speaker #1: Yeah.

[Analyst]: Yeah.

Speaker #3: As in activity-based decrementals on that, yeah.

Anjali Voria: As activity-based decrementals on that.

[Analyst]: Yeah. Okay, got it. No, I appreciate that color. Thanks very much.

Speaker #1: Yeah. Okay, got it. No, I appreciate that, that color. Thanks very much.

Speaker #4: Our next question comes from Eddie Kim with Barclays. Please go ahead.

Bailey: Our next question comes from Eddie Kim with Barclays. Please go ahead.

Speaker #5: Hi, good morning. I just wanted to touch on that additional capacity of 600 megawatts. I wanted to clarify how much of that 600 megawatts is secured, or how much you've ordered versus how much of it you're in advanced discussions for?

Ron Gusek: Hi. Good morning. Just wanted to touch on that additional capacity of 600 megawatts. Just wanted to clarify how much of that 600 megawatts is secured or how much you've ordered versus how much of it you're in advanced discussions for. Secondarily, just your confidence level in being able to deliver that full one-gigawatt capacity by the end of 2027. We've heard a lot of OEMs, that they're all sold out. Just curious, your confidence level in being able to deliver that on time.

Speaker #5: and, secondarily, just your confidence level in being able to deliver that full one gigawatt capacity, by the end of twenty twenty-seven. We, we've heard a lot of OEMs are, that they're, they're all, they're all sold out.

Speaker #5: So, just curious, your confidence level in being able to deliver that on time?

Speaker #3: Yeah, very confident. We, we have unique relationships. You know, o-obviously, you know, we've, you know, with these, these are a lot of the, the same players that we've put for, you know, north of five billion dollars to work with over the last twelve years, right?

Anjali Voria: Yeah. Very tough. We have unique relationships. Obviously, we've, these are a lot of the same players that we've put north of $5 billion to work with over the last 12 years, right? We have really unique relationships with these folks. Very, very confident. Supply chains, we're clarifying some of the bits and pieces of some parts of those megawatts at the moment. Very confident that will all be delivered. Now, that'll be landed. That's not generating. That'll be landed, right? That's the key portion of what's available. It can then be sort of like starting to be worked onto the dirt.

Speaker #3: So, you know, we have renewed unique relationships with these folks. So, very, very confident, you know, in the supply chains. You know, we're clarifying some of the bits and pieces of, you know, some parts of those megawatts at the moment, but, you know, very confident that it will all be delivered.

Speaker #3: Now, that'll be landed. That's not generating. That'll be landed, right? So, but that's the key portion of what's available. So it can then be, sort of like, starting to be worked at, worked onto the dirt.

Speaker #5: Understood. Understood. A-and then just, i-in terms of that 600 megawatts, is all of that under inve, in, in advanced discussions right now, or, or have you actually secured some part of that?

Ron Gusek: Understood. In terms of that 600 megawatts, is all of that in advanced discussions right now, or have you actually secured some part of that?

Speaker #3: Oh, it's all in advance, well, as far as the supply chain, the delivery of it? The vast majority.

Anjali Voria: Oh, it's all in advanced. As far as the supply chain, the delivery of it?

Speaker #5: Just in terms of what you've ordered.

Ron Gusek: Just in terms of what you've ordered.

Speaker #3: Oh, the vast majority. The vast majority.

Anjali Voria: Oh, the vast majority.

Ron Gusek: The vast majority.

Speaker #5: Yeah. The vast majority of the 600 megawatt incremental 600 megawatts is ordered. Okay. Understood. Okay.

Anjali Voria: Yes.

Ron Gusek: The vast majority of the incremental 600 megawatts is ordered. Okay, understood.

Speaker #3: Correct.

Anjali Voria: Correct.

Speaker #5: Great. my follow-up is just on, Oak Low. first, I, I believe you had a small equity stake in Oak Low. Could you, could you just remind us how big that stake is and, and with regards to the collaboration agreement, what, what are you currently contemplating in terms of the number of megawatts you'll be allocating or, or r-ringsensing for that collaboration and, and when do you think is the earliest we would see a deployment, of those assets?

Ron Gusek: Okay. Great. My follow-up is just on Oklo. First, I believe you had a small equity stake in Oklo. Could you just remind us how big that stake is? With regards to the collaboration agreement, what are you currently contemplating in terms of the number of megawatts you'll be allocating or ring-fencing for that collaboration? When do you think is the earliest we would see a deployment of those assets?

Speaker #3: So, you know, sort of our investment in Oak Low, I think is in, you know, is, is in our queue. you know, we kind of the details around it, and you'll see that we have been monetizing some of it.

Anjali Voria: Our investment in Oklo Inc., I think, is in our queue. The details around it, you'll see that we have been monetizing some of it and actually just moving that straight into deposits on power generation, which, again, I think our long-term power generation contracts and contacts with the hyperscalers, a large number of those will eventually include the inclusion of, potentially the inclusion of small modular nuclear. Maybe not on the same specific size, but with the same customers, right? If you think of the vast majority, 70% of the IT infrastructure, data centers that can be built by six or seven folks, right? Using 10 or 12 developers to do that work for them. The combination of ourselves and Oklo Inc. will be involved in a lot of projects together. We'll see how that goes. It was quite exciting.

Speaker #3: And actually, just moving that straight into deposits on power generation, which, again, I think our long-term power generation contracts and contacts with the hyperscalers, a large number of those will eventually include the inclusion of, potentially, SMRs.

Speaker #3: You know, maybe not on the same specific sites, but with the same customers, right? If you think about the vast majority—seventy percent of the, you know, sort of the IT infrastructure, you know, data centers that can be built by six or seven folks, right?

Speaker #3: You know, using ten or twelve developers to do that work for them. So, you know, sort of the combination of ourselves at Oak Low will be involved in a lot of projects together, and we'll see how that goes.

Speaker #3: But yeah, it was quite exciting. I was at the groundbreaking of their national lab generator, and we're hoping to see electrons flowing from that at the early part of 2028, I believe.

Anjali Voria: I was at the groundbreaking of their national lab generator, and we're hoping to see electrons flowing from that at the early part of 2028, I believe. I think the DOE has been very, very helpful with the development of nuclear.

Speaker #3: So, I think the DOE is being very, very helpful with the development of nuclear.

Speaker #5: Great. Thank you, Michael. I'll turn it back.

Ron Gusek: Great. Thank you, Michael. I'll turn it back.

Speaker #4: Our next question is from Dan Coates with Morgan Stanley. You may go ahead.

Bailey: Our next question is from Dan Kutz with Morgan Stanley. You may go ahead.

Speaker #1: Hey, thanks. Good morning.

Michael Stock: Hey, thanks. Good morning.

Speaker #3: Hey there.

Speaker #1: Morning, Dan. so, Michael, like, correct me if I'm wrong, but I think earlier all the color that you gave around the financing options, that was that was all for the incremental six hundred megawatts.

Ron Gusek: Morning, Dan.

Michael Stock: Morning, Dan.

Ron Gusek: Michael, correct me if I'm wrong, but I think earlier, all the color that you gave around the financing options, that was all for the incremental 600 megawatts. A, correct me if that's wrong. B, I just wanted to confirm for the initial 400 megawatts that you guys ordered, is the plan still that that's all going to be kind of financed organically, you know, using the revolver and using organic cash? In a scenario where maybe if things played out worse than contemplated in the near term here, how would you think about financing options for the initial 400 megawatts if, you know, kind of the existing capital structure needed a little bit of extra capital to get those across the finish line? Thanks.

Speaker #1: so, so A, correct me if that's wrong, and, and B, I, I just wanted to confirm for the initial four hundred megawatts that you guys ordered, is, is the plan still that that's all gonna be kind of financed organically, you know, using the revolver and, and using organic cash or, or, you know, I guess, in a scenario where, maybe if things played out worse than contemplated in, in the near term here and, and how, how, how would you think about financing options for the initial four hundred megawatts if, you know, kind of the existing capital structure, needed a little bit of extra capital to kind of get those, get those crafts to finish flying?

Speaker #1: Thanks.

Speaker #3: Yep. Hang on. I can, I can answer. All right. So, I, I don't think you should think of the initial $400, the next $600.

Anjali Voria: Yeah. Hang on. I can answer. All right. I don't think you should think of the initial 400, the next 600. I think you need to think about this as a building of an ongoing business, right, holistically. We will fund, sort of the early-stage deposits, the movement of supply chain until those long lead-time equipments are assigned to assigned ESA. When they're assigned to assigned ESA, now it could be, you know, megawatt number 198 or megawatt number 105, whichever megawatt it is, is assigned to an ESA, will get dropped down into a project and then funded separately. What you're looking at there, and about 30% of that project will be funded by equity, either ours or potentially in partnership. You'll look at it, it's going to be an ongoing stream, a development stream.

Speaker #3: I think you need to think about this as building an ongoing business, right? Holistically. You know, we will fund the early-stage deposits and the movement of the supply chain until those long lead time equipment pieces are assigned to a signed ESA.

Speaker #3: When they're assigned to a signed ESA, now it could be, you know, megawatt number hundred ninety-eight, or megawatt number hundred and five, whichever would be what it is, is assigned to an ESA to get dropped down into a project, and then funded separately.

Speaker #3: So really, what you're looking at there is that about thirty percent of that project will be funded by equity—either ours or potentially in partnership.

Speaker #3: And so when you look at it, it's going to be an ongoing stream, a development stream. You have to remember that what we're doing here is building a company for decades—a generational company. It's a generational power generation company with strong $15+ billion cash flows that are going to be building out and exponentially additive as we go into the future.

Anjali Voria: You've got to remember, what we're doing here is we're building a company for decades, a generational company. It's a power generation company with strong 15-plus-year cash flows that are going to be building out and exponentially additive as we go through the future. This is something that is being built brick by brick by brick. I think that's the key way to think about it, Dan.

Speaker #3: So, you know, this is something that is being built brick by brick by brick. I think that's the key way to think about it there.

Speaker #1: Great. That's really helpful. And then on a, I don't know, maybe for Ron or either of you, but I guess just thinking about some of the puts and takes on completion services or frac profitability per fleet. There are kind of some puts and takes to think through.

Michael Stock: Great. That's really helpful. I don't know, maybe for Ron or either of you, but I guess I'm just thinking about some of the puts and takes on completion services or track profitability per fleet. There are kind of some puts and takes to think through. I mean, you guys have flagged pricing pressure. I feel like Liberty tends to be less reactive in scaling up and down the cost structure, and not the down cycles, but rather kind of, you know, it kind of maintains the high-quality labor force and the overall high-quality business. I guess there's some offsets that you guys have flagged as well, growing fleet size and horsepower per fleet. At least this year, the fleet mix improved with the incremental east track deliveries. Efficiencies are improving.

Speaker #1: I mean, you guys have flagged pricing pressure, and then, also, I feel like Liberty tends to be less reactive, in, in kind of scaling up and down the cost structure, and, and not the down cycles, but rather kind of, you know, it kind of maintains you know, the, the, the high quality labor force and, and, you know, the, the overall, high quality business.

Speaker #1: But I, I guess there are some offsets you guys have flagged as well: growing fleet size and, you know, horsepower per fleet. At least this year, the fleet mix improved with the incremental E frac deliveries.

Speaker #1: Efficiencies are improving. So, yeah, it’s maybe you could just unpack what you’ve seen in kind of profitability per fleet and how you think that trends moving forward.

Michael Stock: If maybe you could just unpack what you've seen in profitability per fleet and how you think that trends moving forward. Thank you.

Speaker #1: Thank you.

Speaker #2: Certainly, Dan. We, I, I would start by saying that, of course, we view this business just like Michael talked about the power business. This is we have a long-term view on this, so no, we, we, of course, we don't react quarterly to, to ups and downs.

Steven Gengaro: Certainly, Dan. I would start by saying that, of course, we view this business just like Michael talked about the power business. We have a long-term view on this. No, we don't react quarterly to ups and downs. People are our most important asset. They are the reason we are as successful as we are. We don't make changes in headcount because of what we view as a short-term blip in activity. I think we are very confident in the long-term viability of the business, in the long-term outlook for oil and gas demand, and the role that Liberty will play in delivering that. We take a long-term view to that piece of our business as well, and particularly the people that are involved in that business. There are, as you say, some puts and takes. Of course, we are in an industry that has competitors.

Speaker #2: People are our most important asset. They are the reason we are as successful as we are. So, we don't make changes in headcount because of what we view as a short-term blip in activity.

Speaker #2: I think, you know, we are very confident in the long-term viability of the business, in the long-term outlook for oil and gas demand, and the role that Liberty will play in delivering that.

Speaker #2: We take a long-term view of that piece of our business as well, and particularly the people who are involved in that business.

Speaker #2: There are, as you say, some puts and takes. Of course, we are in an industry that has competitors, and unfortunately, when companies find white space on their calendar, the way they choose to defend market share is with price.

Steven Gengaro: Unfortunately, when we have companies that find whitespace on their calendar, the way they choose to defend market share is with price. We're not immune to that, of course. Our customers are aware of where the market is. That ultimately leads to conversations that have us needing to adjust our pricing in line with the market. That said, we are still fully utilized today. That is a testament to the people that are in the field, the technology that they have to work with, the supply chain, and other things that support them. We expect that to continue. We'll navigate the pricing headwinds in the near term. When things get better, we will be, as we always have been in the past, the best-positioned company to take advantage of that going forward.

Speaker #2: And we're not immune to that, of course. Our customers are aware of where the market is, and so that ultimately leads to conversations that have us needing to adjust our pricing in line with the market.

Speaker #2: That said, we are still fully utilized today. That is a testament to the people that are in the field, the technology that they have to work with, the supply chain, and other things that support them.

Speaker #2: And we expect that to continue. We will navigate the pricing headwinds in the near term, and when things get better, we will be, as we always have been in the past, the best positioned company to take advantage of that going forward.

Speaker #1: Awesome. Thank you both very much. I'll turn it back.

Michael Stock: Awesome. Thank you both very much. I'll turn it back.

Speaker #4: This concludes our question-and-answer session. I would like to turn the conference back over to Ron Gusek for any closing remarks.

Bailey: This concludes our question and answer session. I would like to turn the conference back over to Ron Gusek for any closing remarks.

Speaker #2: Thank you, Bailey. We pride ourselves on delivering efficiency, maximizing the effect of utilization of the assets we deploy to the field, with the goal of delivering the lowest total cost of completions for our customers and ensuring that a barrel of oil or MCF of gas produced here in North America remains competitive on the global stage.

Steven Gengaro: Thank you, Bailey. We pride ourselves on delivering efficiency, on maximizing the effective utilization of the assets we deploy to the field, with the goal of delivering the lowest total cost of completions for our customers and ensuring that a barrel of oil or MCF of gas produced here in North America remains competitive on the global stage. Delivering the highest levels of efficiency means ensuring we have the best of everything on location, the best people, the best technology, the best company to deliver each individual service. We've always said that Liberty wants to be the provider of frac, wireline, and logistics on any well site, but only if we are the best choice in each of these. If not, then take what we are best at and pair us with the best partners for the others.

Speaker #2: Delivering the highest levels of efficiency means ensuring we have the best of everything on location: the best people, the best technology, and the best company to deliver each individual service.

Speaker #2: We've always said that Liberty wants to be the provider of frac, wireline, and logistics on any well site, but only if we are the best choice in each of these.

Speaker #2: If not, then take what we are best at and pair us with the best partners for the others. Accepting mediocrity is just bad business.

Steven Gengaro: Accepting mediocrity is just bad business, bad for competitiveness, bad for consumers, and bad for investors. Unfortunately, the current punitive tariff policies are doing just that. Tariffs make the economy less efficient. They're a path to mediocrity, not excellence. They raise prices, cut profits, increase unemployment, diminish productivity, and slow economic growth. North America is a leader in energy production, energy that the world desperately needs. Unfortunately, tariffs on steel and aluminum products are driving up the cost of that production, impacting competitiveness on the global stage, potentially leading to a loss of market share. How is that a positive income for either the U.S. or our trading partners? The Secretary of Energy has called the race for AI dominance our next Manhattan project. Winning this race requires access to massive amounts of new power generation capacity and associated hardware, along with many other sophisticated components.

Speaker #2: Bad for competitiveness, bad for consumers, and bad for investors. Unfortunately, the current punitive tariff policies are doing just that. Tariffs make the economy less efficient.

Speaker #2: There are paths to mediocrity, not excellence. They raise prices, cut profits, increase unemployment, diminish productivity, and slow economic growth. North America is a leader in energy production—energy that the world desperately needs.

Speaker #2: Unfortunately, tariffs on steel and aluminum products are driving up the cost of that production, impacting competitiveness on the global stage and potentially leading to a loss of market share.

Speaker #2: How is that a positive income for either the U.S. or our trading partners? The Secretary of Energy has called the race for AI dominance our next Manhattan Project.

Speaker #2: Winning this race requires access to massive amounts of new power generation capacity and associated hardware, along with many other sophisticated components. Much of this is currently made overseas, and much of it is now subject to tariffs.

Steven Gengaro: Much of this is currently made overseas, and much of it is now subject to tariffs. Is this a path to winning a race the administration has identified as so critical to our nation's future? I would argue no. It's a path to mediocrity at best. I hope we quickly pivot to a different course, one that puts us firmly on the path to energy and AI dominance here in the U.S. Thanks for joining us on the call today.

Speaker #2: Is this a path to winning a race the administration has identified as so critical to our nation's future? I would argue no. It's a path to mediocrity, at best.

Speaker #2: I hope we quickly pivot to a different course—one that puts us firmly on the path to energy and AI dominance here in the U.S.

Speaker #2: Thanks for joining us on the call today.

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