Liberty Energy Inc., (NYSE: LBRT; “Liberty” or the “Company”)
announced today second quarter 2023 financial and operational
results.
Summary Results and Highlights
- Revenue of $1.2 billion, a 27% increase over the prior
year
- Net income1 of $153 million, or $0.87 fully diluted earnings
per share, a 45% and 57% increase, respectively, over the prior
year
- Adjusted EBITDA2 of $311 million and 12-month Adjusted Pre-Tax
Return on Capital Employed3 of 44%
- Delivered strong second quarter free cash flow and returned $69
million to shareholders through share repurchases and a quarterly
cash dividend
- Repurchased and retired 2.7% of shares outstanding during the
quarter, and a cumulative 9.7% of shares outstanding since
reinstating the repurchase program one year ago
- Achieved record average daily pumping efficiency for the
quarter
- Closed Liberty Power Innovations (“LPI”) acquisition of Siren
Energy, expanding our integrated alternative fuel and power
solutions for remote applications
“We executed on another quarter with strong financial results,
and I’m especially proud of our operations team for safely
delivering the highest quarterly average daily pumping efficiency
in our history, a high bar raised higher! Liberty achieved adjusted
EBITDA2 of $311 million and fully diluted earnings per share of
$0.87. Our success in growing our long-term competitive advantage
is illustrated by our trailing 12-month Adjusted Pre-Tax Return on
Capital Employed3 of 44%,” commented Chris Wright, Chief Executive
Officer. “Strong cash generation enables long-term investment,
together with a strong return of capital program. In the second
quarter, we returned $69 million to shareholders through the
repurchase of 2.7% of shares outstanding plus our quarterly
dividend. The compounding effect of our last 12 months of share
buybacks is evidenced by the 57% year-over-year increase in fully
diluted earnings per share on a 45% increase in net income.”
“During the second quarter, we closed the Siren Energy
acquisition, expanding LPI’s Texas operations. LPI provides CNG
fuel and field gas processing services to provide a reliable source
of natural gas fuels in support of our digiTechnologiesSM rollout.
These technologies are the leading natural gas-fueled solutions in
the completions industry and will drive higher earnings potential
in the years ahead,” continued Mr. Wright. “We’ve created a unique
competitive position where we can take advantage of accretive
cyclical and secular investment opportunities generating high
returns while returning cash to shareholders and maintaining a
strong balance sheet.”
Outlook
Frac markets in North America are at steady, healthy activity
levels, after moderating a bit from late 2022 as commodity prices
retreated from the 2022 peak. Crude oil prices are now at
pre-Russia-Ukraine war levels which has spurred private operators
in oilier basins to reduce activity. Lower natural gas prices have
led to a curtailment of activity in gas basins. In the second half
of 2023, demand for frac fleets is expected to parallel recent rig
count trends at approximately a one quarter lag. The rig count
shows signs of stabilization emerging. E&P operators are
already benefiting from lower well costs from consumable inputs,
and some are evaluating plans to pull-forward completions activity.
Natural gas markets likely don’t meaningfully increase activity
until 2024 in advance of rising LNG and Mexico exports.
More broadly, global oil markets are signaling a constructive
outlook on a tightening supply-demand balance. OPEC+ supply cuts in
recent months are beginning to take hold, and markets are
anticipating a subsequent draw on global oil inventories. In the
U.S., slowing production growth, a drawdown of oil inventories, and
a likely shift to refilling U.S. strategic petroleum reserves aid
the outlook. Despite recessionary risks, demand for oil remains
resilient given several factors, including global travel trending
towards pre-Covid levels, robust demand from India and strength in
emerging markets. Underinvestment in global production capacity
supports a resilient multi-year cycle for oil and gas.
Relative to prior cycles, frac demand has a natural floor as the
large majority of completions activity is simply offsetting normal
production declines. Operators are largely adhering to flat or very
modest production growth targets. The combination underpins higher
base levels of frac fleet utilization and more insulation from
commodity price volatility than in prior cycles. The current, more
consolidated industry is better prepared to navigate near-term
softness in completions activity by reducing fleet counts to
balance the market and protect margins.
“The industrialization of emerging economies is driving long
term demand for reliable, affordable energy, and the North American
land market is in a strong position as the largest supplier of
incremental production. Our industry remains healthy, even with a
modest contraction in oil prices from 2022 levels and transient
softness in natural gas markets. The discipline of producers and
service providers alike, with investment programs fueled by cash
flow, steadier activity levels, and strong balance sheets, supports
an industry with healthy returns and free cash flow generation,”
commented Mr. Wright.
“We anticipate North American completions activity will moderate
in the second half of the year versus the first half. Service
companies are reducing fleets in response, supporting a balanced
frac market and a largely stable price environment. We expect to
continue to deliver healthy free cash flow and return capital to
our shareholders through opportunistic share repurchases and
dividends,” commented Mr. Wright.
Share Repurchase Program
During the quarter ended June 30, 2023, Liberty repurchased and
retired 4,722,257 shares of Class A common stock at an average of
$12.71 per share, representing 2.7% of shares outstanding, for
approximately $60 million. Liberty has cumulatively repurchased and
retired 9.7% of shares outstanding at program commencement on July
25, 2022. Total remaining authorization for future common share
repurchases is approximately $240 million.
The shares may be repurchased from time to time in open market
transactions, through block trades, in privately negotiated
transactions, through derivative transactions or by other means in
accordance with federal securities laws. The timing, as well as the
number and value of shares repurchased under the program, will be
determined by the Company at its discretion and will depend on a
variety of factors, including management’s assessment of the
intrinsic value of the Company’s common stock, the market price of
the Company’s common stock, general market and economic conditions,
available liquidity, compliance with the Company’s debt and other
agreements, applicable legal requirements, and other
considerations. The exact number of shares to be repurchased by the
Company is not guaranteed, and the program may be suspended,
modified, or discontinued at any time without prior notice. The
Company expects to fund the repurchases by using cash on hand,
borrowings under its revolving credit facility and expected free
cash flow to be generated through the authorization period.
Quarterly Cash Dividend
During the quarter ended June 30, 2023, the Company paid a
quarterly cash dividend of $0.05 per share of Class A common stock,
or approximately $9 million in aggregate to shareholders.
On July 18, 2023, the Board declared a cash dividend of $0.05
per share of Class A common stock, to be paid on September 20, 2023
to holders of record as of September 6, 2023.
Future declarations of quarterly cash dividends are subject to
approval by the Board of Directors and to the Board’s continuing
determination that the declarations of dividends are in the best
interests of Liberty and its stockholders. Future dividends may be
adjusted at the Board’s discretion based on market conditions and
capital availability.
Second Quarter Results
For the second quarter of 2023, revenue grew to $1.2 billion, an
increase of 27% from $943 million in the second quarter of 2022 and
a decrease of 5% from $1.3 billion in the first quarter of
2023.
Net income1 (after taxes) totaled $153 million for the second
quarter of 2023 compared to net income1 of $105 million in the
second quarter of 2022 and net income1 of $163 million in the first
quarter of 2023.
Adjusted EBITDA2 of $311 million, increased 59% from $196
million in the second quarter of 2022 and decreased 6% from $330
million in the first quarter of 2023. Please refer to the
reconciliation of Adjusted EBITDA (a non-GAAP measure) to net
income (a GAAP measure) in this earnings release.
Fully diluted earnings per share was $0.87 for the second
quarter of 2023 compared to fully diluted earnings per share of
$0.55 for the second quarter of 2022 and fully diluted earnings per
share of $0.90 for the first quarter of 2023.
Balance Sheet and Liquidity
As of June 30, 2023, Liberty had cash on hand of $32 million, an
increase from first quarter levels, and total debt of $288 million
drawn on the secured asset-based revolving credit facility (“ABL
Facility”). Total liquidity, including availability under the
credit facility, was $226 million as of June 30, 2023.
Conference Call
Liberty will host a conference call to discuss the results at
8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Thursday, July
20, 2023. Presenting Liberty’s results will be Chris Wright, Chief
Executive Officer, Ron Gusek, President, and Michael Stock, Chief
Financial Officer.
Individuals wishing to participate in the conference call should
dial (833) 255-2827, or for international callers (412) 902-6704.
Participants should ask to join the Liberty Energy call. A live
webcast will be available at http://investors.libertyfrac.com. The
webcast can be accessed for 90 days following the call. A telephone
replay will be available shortly after the call and can be accessed
by dialing (877) 344-7529, or for international callers (412)
317-0088. The passcode for the replay is 2705748. The replay will
be available until July 27, 2023.
About Liberty
Liberty is a leading North American energy services firm that
offers one of the most innovative suites of completion services and
technologies to onshore oil and natural gas exploration and
production companies. Liberty was founded in 2011 with a relentless
focus on developing and delivering next generation technology for
the sustainable development of unconventional energy resources in
partnership with our customers. Liberty is headquartered in Denver,
Colorado. For more information about Liberty, please contact
Investor Relations at IR@libertyenergy.com.
1
Net income attributable to controlling and
non-controlling interests.
2
“Adjusted EBITDA” is not presented in
accordance with generally accepted accounting principles in the
United States (“U.S. GAAP”). Please see the supplemental financial
information in the table under “Reconciliation of Net Income to
EBITDA and Adjusted EBITDA” at the end of this earnings release for
a reconciliation of the non-GAAP financial measure of Adjusted
EBITDA to its most directly comparable GAAP financial measure.
3
Adjusted Pre-Tax Return on Capital
Employed (“ROCE”) is a non-U.S. GAAP operational measure. Please
see the supplemental financial information in the table under
“Calculation of Adjusted Pre-Tax Return on Capital Employed” at the
end of this earnings release for a calculation of this measure.
Non-GAAP Financial Measures
This earnings release includes unaudited non-GAAP financial and
operational measures, including EBITDA, Adjusted EBITDA, and ROCE.
We believe that the presentation of these non-GAAP financial and
operational measures provides useful information about our
financial performance and results of operations. We define Adjusted
EBITDA as EBITDA adjusted to eliminate the effects of items such as
non-cash stock-based compensation, new fleet or new basin start-up
costs, fleet lay-down costs, costs of asset acquisitions, gain or
loss on the disposal of assets, bad debt reserves, transaction,
severance, and other costs, the loss or gain on remeasurement of
liability under our tax receivable agreements, the gain on
investments, and other non-recurring expenses that management does
not consider in assessing ongoing performance.
Our board of directors, management, investors, and lenders use
EBITDA and Adjusted EBITDA to assess our financial performance
because it allows them to compare our operating performance on a
consistent basis across periods by removing the effects of our
capital structure (such as varying levels of interest expense),
asset base (such as depreciation, depletion, and amortization) and
other items that impact the comparability of financial results from
period to period. We present EBITDA and Adjusted EBITDA because we
believe they provide useful information regarding the factors and
trends affecting our business in addition to measures calculated
under GAAP.
We define Adjusted Pre-Tax Return on Capital Employed (“ROCE”)
as the ratio of pre-tax net income (adding back income tax and tax
receivable agreement impacts) for the twelve months ended June 30,
2023 to Average Capital Employed. Average Capital Employed is the
simple average of total capital employed (both debt and equity) as
of June 30, 2023 and June 30, 2022. ROCE is presented based on our
management’s belief that these non-GAAP measures are useful
information to investors when evaluating our profitability and the
efficiency with which management has employed capital over time.
Our management uses ROCE for that purpose. ROCE is not a measure of
financial performance under U.S. GAAP and should not be considered
an alternative to net income, as defined by U.S. GAAP
Non-GAAP financial and operational measures do not have any
standardized meaning and are therefore unlikely to be comparable to
similar measures presented by other companies. The presentation of
non-GAAP financial and operational measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with U.S. GAAP. See the
tables entitled Reconciliation and Calculation of Non-GAAP
Financial and Operational Measures for a reconciliation or
calculation of the non-GAAP financial or operational measures to
the most directly comparable GAAP measure.
Forward-Looking and Cautionary Statements
The information above includes “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts,
included herein concerning, among other things, statements about
our expected growth from recent acquisitions, expected performance,
future operating results, oil and natural gas demand and prices and
the outlook for the oil and gas industry, future global economic
conditions, improvements in operating procedures and technology,
our business strategy and the business strategies of our customers,
the deployment of fleets in the future, planned capital
expenditures, future cash flows and borrowings, pursuit of
potential acquisition opportunities, our financial position, return
of capital to stockholders, business strategy and objectives for
future operations, are forward-looking statements. These
forward-looking statements are identified by their use of terms and
phrases such as “may,” “expect,” “estimate,” “outlook,” “project,”
“plan,” “position,” “believe,” “intend,” “achievable,”
“anticipate,” “will,” “continue,” “potential,” “likely,” “should,”
“could,” and similar terms and phrases. However, the absence of
these words does not mean that the statements are not
forward-looking. Although we believe that the expectations
reflected in these forward-looking statements are reasonable, they
do involve certain assumptions, risks and uncertainties. The
outlook presented herein is subject to change by Liberty without
notice and Liberty has no obligation to affirm or update such
information, except as required by law. These forward-looking
statements represent our expectations or beliefs concerning future
events, and it is possible that the results described in this
earnings release will not be achieved. These forward-looking
statements are subject to certain risks, uncertainties and
assumptions identified above or as disclosed from time to time in
Liberty's filings with the Securities and Exchange Commission. As a
result of these factors, actual results may differ materially from
those indicated or implied by such forward-looking statements.
Any forward-looking statement speaks only as of the date on
which it is made, and, except as required by law, we do not
undertake any obligation to update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise. New factors emerge from time to time, and it is not
possible for us to predict all such factors. When considering these
forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in “Item 1A. Risk Factors”
included in our Annual Report on Form 10-K for the year ended
December 31, 2022 as filed with the SEC on February 10, 2023, in
our Form 10-Q for the quarter ended March 31, 2023 as filed with
the SEC on April 21, 2023 and in our other public filings with the
SEC. These and other factors could cause our actual results to
differ materially from those contained in any forward-looking
statements.
Liberty Energy Inc.
Selected Financial
Data
(unaudited)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
2023
2023
2022
2023
2022
Statement of Operations Data:
(amounts in thousands, except
for per share data)
Revenue
$
1,194,988
$
1,262,077
$
942,619
$
2,457,065
$
1,735,389
Costs of services, excluding depreciation,
depletion, and amortization shown separately
833,456
888,416
713,718
1,721,872
1,383,737
General and administrative
58,034
53,036
42,162
111,070
80,480
Transaction, severance, and other
costs
985
617
2,192
1,602
3,526
Depreciation, depletion, and
amortization
99,695
94,401
77,379
194,096
151,967
(Gain) loss on disposal of assets
(3,660
)
487
(3,436
)
(3,173
)
1,236
Total operating expenses
988,510
1,036,957
832,015
2,025,467
1,620,946
Operating income
206,478
225,120
110,604
431,598
114,443
Loss on remeasurement of liability under
tax receivable agreements (1)
—
—
168
—
4,333
Interest expense, net
6,475
7,891
4,862
14,366
9,186
Net income before taxes
200,003
217,229
105,574
417,232
100,924
Income tax expense (1)
47,332
54,483
235
101,815
1,065
Net income
152,671
162,746
105,339
315,417
99,859
Less: Net income attributable to
non-controlling interests
—
91
183
91
79
Net income attributable to Liberty Energy
Inc. stockholders
$
152,671
$
162,655
$
105,156
$
315,326
$
99,780
Net income attributable to Liberty Energy
Inc. stockholders per common share:
Basic
$
0.88
$
0.92
$
0.56
$
1.80
$
0.54
Diluted
$
0.87
$
0.90
$
0.55
$
1.76
$
0.52
Weighted average common shares
outstanding:
Basic
173,131
176,569
186,719
174,840
185,367
Diluted (2)
176,225
181,088
190,441
178,837
190,623
Other Financial and Operational
Data
Capital expenditures (3)
$
151,746
$
129,654
$
127,045
$
281,400
$
217,107
Adjusted EBITDA (4)
$
311,463
$
329,885
$
196,109
$
641,348
$
287,940
(1)
During the second quarter of 2021, the
Company entered into a three-year cumulative pre-tax book loss
driven primarily by Covid-19 which, applying the interpretive
guidance to Accounting Standards Codification Topic 740 - Income
Taxes, required the Company to recognize a valuation allowance
against certain of the Company’s deferred tax assets. During the
year ended December 31, 2022, the Company achieved three years of
cumulative pre-tax income in the U.S. federal tax jurisdiction,
management determined that there is sufficient positive evidence to
conclude that it is more likely than not that the Company will
realize the Company’s net deferred tax assets in the foreseeable
future. For the year ended December 31, 2022 the Company recorded a
release of the valuation allowance. In connection with both the
recognition and release of a valuation allowance, the Company was
also required to remeasure the liability under the tax receivable
agreements.
(2)
In accordance with U.S. GAAP, diluted
weighted average common shares outstanding for the three months
ended June 30, 2022, exclude 7 weighted average shares of Class B
common stock outstanding during the period.
(3)
Net capital expenditures presented above
include investing cash flows from purchase of property and
equipment, excluding acquisitions, net of proceeds from the sales
of assets.
(4)
Adjusted EBITDA is a non-GAAP financial
measure. See the tables entitled “Reconciliation and Calculation of
Non-GAAP Financial and Operational Measures” below.
Liberty Energy Inc.
Condensed Consolidated Balance
Sheets
(unaudited, amounts in
thousands)
June 30,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
31,667
$
43,676
Accounts receivable and unbilled
revenue
719,194
586,012
Inventories
201,069
214,454
Prepaids and other current assets
121,985
112,531
Total current assets
1,073,915
956,673
Property and equipment, net
1,546,187
1,362,364
Operating and finance lease right-of-use
assets
149,868
139,003
Other assets
133,292
105,300
Deferred tax asset
21,240
12,592
Total assets
$
2,924,502
$
2,575,932
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
705,689
$
609,790
Current portion of operating and finance
lease liabilities
38,541
38,687
Current portion of long-term debt, net of
discount
—
1,020
Total current liabilities
744,230
649,497
Long-term debt, net of discount
288,000
217,426
Long-term operating and finance lease
liabilities
102,422
91,785
Deferred tax liability
1,067
1,044
Payable pursuant to tax receivable
agreements
114,842
118,874
Total liabilities
1,250,561
1,078,626
Stockholders' equity:
Common Stock
1,704
1,791
Additional paid in capital
1,146,130
1,266,097
Retained earnings
531,974
234,525
Accumulated other comprehensive loss
(5,867
)
(7,396
)
Total stockholders’ equity
1,673,941
1,495,017
Non-controlling interest
—
2,289
Total equity
1,673,941
1,497,306
Total liabilities and equity
$
2,924,502
$
2,575,932
Liberty Energy Inc.
Reconciliation and Calculation
of Non-GAAP Financial and Operational Measures
(unaudited, amounts in
thousands)
Reconciliation of Net Income to EBITDA
and Adjusted EBITDA
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
June 30,
2023
2023
2022
2023
2022
Net income
$
152,671
$
162,746
$
105,339
$
315,417
$
99,859
Depreciation, depletion, and
amortization
99,695
94,401
77,379
194,096
151,967
Interest expense, net
6,475
7,891
4,862
14,366
9,186
Income tax expense
47,332
54,483
235
101,815
1,065
EBITDA
$
306,173
$
319,521
$
187,815
$
625,694
$
262,077
Stock based compensation expense
7,965
7,178
4,201
15,143
11,014
Fleet start-up costs
—
2,082
5,169
2,082
5,754
Transaction, severance, and other
costs
985
617
2,192
1,602
3,526
(Gain) loss on disposal of assets
(3,660
)
487
(3,436
)
(3,173
)
1,236
Loss on remeasurement of liability under
tax receivable agreements
—
—
168
—
4,333
Adjusted EBITDA
$
311,463
$
329,885
$
196,109
$
641,348
$
287,940
Calculation of Pre-Tax Return on
Capital Employed
Twelve Months Ended
June 30,
2023
2022
Net income
$
615,860
Add back: Income tax expense
99,957
Add back: Loss on remeasurement of
liability under tax receivable agreements (1)
71,858
Adjusted Pre-tax net income
$
787,675
Capital Employed
Total debt, net of discount
$
288,000
$
253,950
Total equity
1,673,941
1,330,016
Total Capital Employed
$
1,961,941
$
1,583,966
Average Capital Employed (2)
$
1,772,954
Pre-Tax Return on Capital Employed (3)
44
%
(1)
Loss on remeasurement of the liability
under tax receivable agreements is a result of the release of the
valuation allowance on the Company’s deferred tax assets and should
be excluded in the determination of pre-tax return on capital
employed.
(2)
Average Capital Employed is the simple
average of Total Capital Employed as of June 30, 2023 and 2022.
(3)
Adjusted Pre-tax Return on Capital
Employed is the ratio of pre-tax net income for the twelve months
ended June 30, 2023 to Average Capital Employed.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230719087481/en/
Michael Stock Chief Financial Officer
Anjali Voria, CFA Strategic Finance & Investor
Relations Lead
303-515-2851 IR@libertyenergy.com
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