Liberty Energy Inc., (NYSE: LBRT; “Liberty” or the “Company”)
announced today third quarter 2023 financial and operational
results.
Summary Results and Highlights
- Revenue of $1.2 billion, a 2% increase over the prior year
- Net income1 of $149 million, or $0.85 fully diluted earnings
per share, a 1% and 10% increase, respectively, over the prior
year
- Adjusted EBITDA2 of $319 million and 12-month Adjusted Pre-Tax
Return on Capital Employed3 of 44%
- Achieved third consecutive quarter of record average daily
pumping efficiency driving solid results
- Began commercial deployment of digiPrime℠ hybrid pumps, the
primary source of future horsepower anchored by the most efficient
natural gas frac engines with the lowest emissions profile
- Delivered strong third quarter free cash flow and returned $38
million to shareholders through share repurchases and a quarterly
cash dividend
- Repurchased and retired 1.0% of shares outstanding during the
quarter, and a cumulative 10.6% of shares outstanding since
reinstating the repurchase program in July 2022
- Increased quarterly cash dividend by 40% to $0.07 per share
beginning fourth quarter of 2023
- Included in the S&P 600 Index prior to the market open on
September 18, 2023
“Liberty delivered excellent quarterly financial results
reflecting outstanding operational execution, focused customer
engagement and agility across a softer North American frac market.
Record pumping efficiencies drove sequential growth in revenue and
Adjusted EBITDA while idling one fleet during the quarter. The
industry remained disciplined, championing steady pricing for
quality services while withdrawing underutilized frac fleets from
the market. Our superior execution combined with expanded vertical
integration and technology investments culminated in a trailing
12-month Adjusted Pre-Tax Return on Capital Employed3 of 44%,”
commented Chris Wright, Chief Executive Officer.
“Over the years, our investment decisions have increased our
competitive advantage, driving value creation through technology,
scale and vertical integration. Today, the latest piece in our
digiTechnologies℠ suite is demonstrating impressive operating
results. The commercial deployment of our proprietary digiPrime
units commenced in late September, quickly becoming the crew and
customer’s favorite technology on location. Our digiFrac℠ fleets
deployed during the year reached new operating records, maximizing
fuel efficiency with Liberty Power Innovations (“LPI”) CNG
logistics and on-site management. We are on track to be operating
four digiFleets by year end and six digiFleets by the end of
January 2024. We are excited by the strong customer pull for our
digiFleets and the enduring competitive advantages they bring to
our portfolio,” continued Mr. Wright.
“Our returns-focused strategy centers on strong cash flow
generation to fund compelling investments while returning cash to
shareholders. During the third quarter, we repurchased 1% of our
shares outstanding, or a cumulative 11% since our buyback
reinstatement in July 2022.”
“Our investment in differential technologies and innovative
businesses build on our competitive advantage and expand our market
opportunities. We increased our quarterly cash dividend by 40% in
response to the significant growth in our per share earnings and
cash generating abilities from our business transformation over the
last three years. We remain focused on maximizing the value of each
Liberty share and driving higher total returns for years to
come.”
Outlook
Frac industry dynamics are encouraging amidst moderating demand
trends, as service prices have remained relatively steady while
underutilized frac fleets exited the market. Fleets across the
industry were idled in response to completions activity softness,
supporting a better supply-demand balance of marketed fleets as
compared to prior cycles. As the Shale Revolution matures, the
industry has adapted to a new era in frac markets through
consolidation, technological progress, disciplined investment and
serving increasingly complex customer needs.
Frac activity has largely stabilized at current levels,
representing a baseload of frac fleet demand needed to sustain
E&P operators’ flattish production levels. Fourth quarter
trends will likely see seasonal softness, winter weather, and
holiday disruptions. We expect the recent strengthening of
commodity prices will drive a modest increase in activity beginning
in 2024.
Global oil and gas markets found firmer footing during the third
quarter, driving higher oil and gas prices. Volatility in commodity
markets has emerged from the possibility of an escalating conflict
in the Middle East and renewed recessionary fears. Recognizing the
elevated uncertainty, global oil industry production and demand
trends infer that the delicate balance of oil and gas markets is
tilted to the upside. The long-term demand outlook for secure North
American energy anchors a more durable cycle. OPEC+ decisions,
including the extension of Saudi Arabia’s production cuts, further
demonstrate a willingness to support commodity prices, underpinning
long-term investments in North American shale.
“Energy market fundamentals support positive momentum in North
America resource development, leading to consolidation and
investment amongst E&P operators focused on long term value
creation. Liberty is uniquely positioned to support our customers’
ambitions to unlock value with our next generation technologies,
integrated services, and scale. We are confident that our superior,
reliable service quality better positions our customers to achieve
higher capital and operating efficiencies to deliver durable
returns,” commented Mr. Wright.
“Liberty teams outperformed in the third quarter despite
industry activity headwinds, delivering significant operating
efficiencies and attractive returns. Fourth quarter activity is
expected to slow modestly on normal seasonality and the related
impact on efficiency. For full year 2023, we expect Adjusted EBITDA
will be at the high end of our guidance range of 30% to 40% growth
over 2022,” continued Mr. Wright. “We continue to deliver superior
returns and a differential service for our customers. Our
commitment to excellence and focus on company culture, our next
generation digiTechnologies suite, and LPI positions us well to
compete in near-term cycles and over the long term.”
Share Repurchase Program
During the quarter ended September 30, 2023, Liberty repurchased
and retired 1,784,899 shares of Class A common stock at an average
of $16.38 per share, representing 1.0% of shares outstanding, for
approximately $29 million. Liberty has cumulatively repurchased and
retired 10.6% of shares outstanding at program commencement on July
25, 2022. Total remaining authorization for future common share
repurchases is approximately $211 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 September 30, 2023, the Company paid a
quarterly cash dividend of $0.05 per share of Class A common stock,
or approximately $8 million in aggregate to shareholders.
On October 17, 2023, the Board declared a cash dividend of $0.07
per share of Class A common stock, to be paid on December 20, 2023
to holders of record as of December 6, 2023. This dividend
represents a 40% increase from the prior quarter.
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.
S&P 600 Inclusion
Liberty was recently included in the S&P 600 Index effective
prior to the market open on September 18, 2023. Prior to the
inclusion, Liberty was not a constituent in the S&P Composite
1500 Indices.
Third Quarter Results
For the third quarter of 2023, revenue grew to $1.2 billion, an
increase of 2% from $1.2 billion in the third quarter of 2022 and
2% from $1.2 billion in the second quarter of 2023.
Net income1 (after taxes) totaled $149 million for the third
quarter of 2023 compared to net income1 of $147 million in the
third quarter of 2022 and net income1 of $153 million in the second
quarter of 2023.
Adjusted EBITDA2 of $319 million, increased 15% from $277
million in the third quarter of 2022 and 2% from $311 million in
the second 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 $0.85 for the third quarter
of 2023 compared to fully diluted earnings per share of $0.78 for
the third quarter of 2022 and fully diluted earnings per share of
$0.87 for the second quarter of 2023.
Balance Sheet and Liquidity
As of September 30, 2023, Liberty had cash on hand of $27
million, a slight decrease from second quarter levels, and total
debt of $223 million drawn on the secured asset-based revolving
credit facility (“ABL Facility”), a $65 million decrease from
second quarter. Total liquidity, including availability under the
credit facility, based on the September 30, 2023 financials, was
$322 million.
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,
October 19, 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 9116297. The replay will
be available until October 26, 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.
- Net income attributable to controlling and non-controlling
interests.
- “Adjusted EBITDA” is a financial measure not presented in
accordance with generally accepted accounting principles in the
United States (“U.S. GAAP”). This measure is defined below under
the heading “Non-GAAP Financial Measures.” 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.
- Adjusted Pre-Tax Return on Capital Employed (“ROCE”) is a
non-U.S. GAAP operational measure. This measure is defined below
under the heading “Non-GAAP Financial Measures.” 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 or loss 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 September
30, 2023 to Average Capital Employed. Average Capital Employed is
the simple average of total capital employed (both debt and equity)
as of September 30, 2023 and September 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,” “forecast,”
“assume,” “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, in our Form 10-Q for the quarter ended
June 30, 2023 as filed with the SEC on July 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
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
2023
2023
2022
2023
2022
Statement of Operations Data:
(amounts in thousands, except
for per share data)
Revenue
$
1,215,905
$
1,194,988
$
1,188,247
$
3,672,970
$
2,923,636
Costs of services, excluding depreciation,
depletion, and amortization shown separately
850,247
833,456
874,453
2,572,119
2,258,190
General and administrative
55,040
58,034
50,473
166,110
130,953
Transaction, severance, and other
costs
202
985
1,767
1,804
5,293
Depreciation, depletion, and
amortization
108,997
99,695
82,848
303,093
234,815
Gain on disposal of assets
(3,808
)
(3,660
)
(4,277
)
(6,981
)
(3,041
)
Total operating expenses
1,010,678
988,510
1,005,264
3,036,145
2,626,210
Operating income
205,227
206,478
182,983
636,825
297,426
Loss on remeasurement of liability under
tax receivable agreements (1)
—
—
28,900
—
33,233
Gain on investments
—
—
(2,525
)
—
(2,525
)
Interest expense, net
6,776
6,475
6,773
21,142
15,959
Net income before taxes
198,451
200,003
149,835
615,683
250,759
Income tax expense (1)
49,843
47,332
2,572
151,658
3,637
Net income
148,608
152,671
147,263
464,025
247,122
Less: Net income attributable to
non-controlling interests
—
—
310
91
389
Net income attributable to Liberty Energy
Inc. stockholders
$
148,608
$
152,671
$
146,953
$
463,934
$
246,733
Net income attributable to Liberty Energy
Inc. stockholders per common share:
Basic
$
0.88
$
0.88
$
0.79
$
2.68
$
1.33
Diluted
$
0.85
$
0.87
$
0.78
$
2.62
$
1.30
Weighted average common shares
outstanding:
Basic
169,781
173,131
185,508
173,135
185,414
Diluted
173,984
176,225
189,907
177,284
190,465
Other Financial and Operational
Data
Capital expenditures (2)
$
161,379
$
151,746
$
95,047
$
442,779
$
312,154
Adjusted EBITDA (3)
$
319,213
$
311,463
$
276,853
$
960,561
$
564,793
___________________
(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)
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.
(3)
Adjusted EBITDA is a non-GAAP
financial measure. This measure is defined under the heading
“Non-GAAP Financial Measures.” Please 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)
September 30,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
26,603
$
43,676
Accounts receivable and unbilled
revenue
728,426
586,012
Inventories
211,747
214,454
Prepaids and other current assets
100,848
112,531
Total current assets
1,067,624
956,673
Property and equipment, net
1,613,437
1,362,364
Operating and finance lease right-of-use
assets
233,475
139,003
Other assets
153,349
105,300
Deferred tax asset
21,238
12,592
Total assets
$
3,089,123
$
2,575,932
Liabilities and Equity
Current liabilities:
Accounts payable and accrued
liabilities
$
738,160
$
609,790
Current portion of operating and finance
lease liabilities
55,649
38,687
Current portion of long-term debt, net of
discount
—
1,020
Total current liabilities
793,809
649,497
Long-term debt, net of discount
223,000
217,426
Long-term operating and finance lease
liabilities
167,870
91,785
Deferred tax liability
1,040
1,044
Payable pursuant to tax receivable
agreements
114,842
118,874
Total liabilities
1,300,561
1,078,626
Stockholders' equity:
Common Stock
1,686
1,791
Additional paid in capital
1,123,967
1,266,097
Retained earnings
671,924
234,525
Accumulated other comprehensive loss
(9,015
)
(7,396
)
Total stockholders’ equity
1,788,562
1,495,017
Non-controlling interest
—
2,289
Total equity
1,788,562
1,497,306
Total liabilities and equity
$
3,089,123
$
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
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
2023
2023
2022
2023
2022
Net income
$
148,608
$
152,671
$
147,263
$
464,025
$
247,122
Depreciation, depletion, and
amortization
108,997
99,695
82,848
303,093
234,815
Interest expense, net
6,776
6,475
6,773
21,142
15,959
Income tax expense
49,843
47,332
2,572
151,658
3,637
EBITDA
$
314,224
$
306,173
$
239,456
$
939,918
$
501,533
Stock based compensation expense
8,595
7,965
6,112
23,738
17,126
Fleet start-up costs
—
—
7,420
2,082
13,174
Transaction, severance, and other
costs
202
985
1,767
1,804
5,293
Gain on disposal of assets
(3,808
)
(3,660
)
(4,277
)
(6,981
)
(3,041
)
Loss on remeasurement of liability under
tax receivable agreements
—
—
28,900
—
33,233
Gain on investments
$
—
$
—
$
(2,525
)
$
—
$
(2,525
)
Adjusted EBITDA
$
319,213
$
311,463
$
276,853
$
960,561
$
564,793
Calculation of Adjusted Pre-Tax Return
on Capital Employed
Twelve Months Ended
September 30,
2023
2022
Net income
$
617,205
Add back: Income tax expense
147,228
Add back: Loss on remeasurement of
liability under tax receivable agreements (1)
42,958
Adjusted Pre-tax net income
$
807,391
Capital Employed
Total debt, net of discount
$
223,000
$
253,698
Total equity
1,788,562
1,407,438
Total Capital Employed
$
2,011,562
$
1,661,136
Average Capital Employed (2)
$
1,836,349
Adjusted 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 September 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 September 30, 2023 to Average Capital Employed.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231018932918/en/
Michael Stock Chief Financial Officer
Anjali Voria, CFA Strategic Finance & Investor
Relations Lead
303-515-2851 IR@libertyenergy.com
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