Dan Kutz

Dan Kutz asked for an update on the size of the Emerald fleet (100% natural gas-powered equipment) after the latest direct-drive delivery. He also requested a juxtaposition of the differences between Emerald electric fleets and direct-drive fleets in terms of build cost, maintenance cost, fuel/operating cost, and operating efficiencies.

Answer

Andy Hendricks, President and CEO, stated the Emerald fleet is 'around that 250,000 level right now,' with more 100% natural gas direct-drive units being delivered and deployed this quarter. He noted that overall horsepower has decreased from 3.3 million to 2.8 million, which he views constructively for the completions market, and will provide an updated exact number on the next call. Mr. Hendricks explained that Emerald electric performs well but requires significant capital for turbines (e.g., $40M-$45M for a 35MW turbine). The new 100% natural gas direct-drive engines (3,600 HP) offer a '25%, maybe 30% reduction' in overall capital cost for the same horsepower at location compared to electric with turbines. While direct-drive OpEx is higher than diesel, it's projected lower than maintaining electric pumps and turbines.

Dan Kutz (Morgan Stanley) asked for an update on the Emerald fleet size, specifically the horsepower capacity after the latest direct-drive delivery, and the projected capacity once all currently ordered deliveries are completed. He also requested a comparison of Emerald electric fleets and direct-drive fleets regarding build cost, maintenance cost, fuel/operating cost, and operating efficiencies.

Answer

President and CEO Andy Hendricks stated the Emerald fleet is currently around 250,000 horsepower, with more 100% natural gas direct-drive units being delivered this quarter, pushing the total slightly over 250,000 horsepower. He explained that Emerald electric fleets, especially for simul-fracs, require significant capital for turbines ($40-45 million for 35 MW, $15-20 million for smaller). In contrast, the new high-horsepower (3,600 HP) 100% natural gas direct-drive engines offer a 25-30% reduction in overall capital cost for the same horsepower at location, with projected lower OpEx compared to maintaining both electric pumps and turbine generators.

Dan Kutz asked for clarification on financing options, specifically if previous color applied only to the incremental 600 MW and if the initial 400 MW was still planned for organic/revolver financing, including contingencies. He also inquired about the puts and takes on frac profitability per fleet.

Answer

CFO Michael Stock clarified that financing is holistic, not segmented by initial/incremental MW. Early-stage deposits are funded, but once equipment is assigned to an ESA, it's dropped into a project company with non-recourse debt (30% equity, ours or partners). He emphasized building a generational company. CEO Ron Gusek reiterated a long-term view on the frac business, maintaining headcount despite short-term blips. He acknowledged pricing pressure due to competitors defending market share but noted Liberty's full utilization, expecting to navigate headwinds and be well-positioned for future improvements.

Asked for an overview of the economic sensitivity across the company's business lines, whether macroeconomic concerns are affecting the transition to fluorine-free suppressants, and if there are any adjustments to the full-year 2025 financial outlook.

Answer

Management confirmed that the retardant and suppressant businesses have very low economic sensitivity, while the specialty products business has a modest link to miles driven. The transition to fluorine-free products continues unabated by macro concerns so far. The full-year financial assumptions remain unchanged, with strong Q1 working capital performance viewed as a timing benefit.

Sought to confirm the active frac fleet count is now around 30 and if that is a reasonable number for 2025. Also asked about the Proppant business, specifically if market share gains are expected, whether any mines are fully shut down, and the outlook for the internal versus external sales mix.

Answer

Management confirmed the active fleet count is in the 'low 30s' and that is a safe assumption for the year, noting they will not grow further without supportive economic returns. Regarding proppant, they confirmed one Haynesville mine remains idle from 2024 while seven others are operational and seeing high utilization. They emphasized a focus on securing long-term commitments over short-term price gains, without detailing market share or sales mix targets.