Liberty Energy - Q3 2024
October 17, 2024
Transcript
Operator (participant)
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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then one on a touch-tone phone. To withdraw your question, please press Star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Anjali Voria, Director of Investor Relations. Please go ahead.
Anjali Voria (Director of Investor Relations)
Thanks, Wyatt. Good morning, and welcome to the Liberty Energy third quarter twenty twenty-four earnings call. Joining us on the call are Chris Wright, Chief Executive Officer, Ron Gusek, President, 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 current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments of today also include non-GAAP financial and operational measures.
These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, and adjusted pre-tax return on capital employed, are not a substitute 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, as discussed on this call, are available on our investor relations website. I will now turn the call over to Chris.
Chris Wright (CEO)
Thank you, Anjali. Good morning, everyone, and thank you for joining us to discuss our third quarter twenty twenty-four operational and financial results. Liberty delivered a solid quarter with revenue of $1.1 billion and adjusted EBITDA of $248 million. We again reached new heights in efficiencies, pumping more hours in a quarter than ever before company-wide amidst a backdrop of a slowing demand environment. We are excited to celebrate the progress of a Liberty DigiPrime fleet that set the company record for number of hours pumped in a month by any crew in company history. Low fuel costs from natural gas, low emissions, and record operational performance. The Liberty culture of striving for improvement and pushing beyond our prior achievements continues regardless of the macro environment we find ourselves in.
I'm proud of our team for executing at the highest operating levels, generating strong financial performance and value for our customers. In the third quarter, we generated strong free cash flow, enabling a robust return of capital program. We opportunistically increased our share repurchases to $39 million at a lower stock price relative to the prior quarter. Since the reinstatement of our capital return program in July 2022, we have distributed $509 million to shareholders through the retirement of 14% of shares outstanding and quarterly cash dividends. Earlier this week, we also announced a 14% increase in our quarterly cash dividend to $0.08 per share. The compounding effect of buybacks and dividends is an attractive way to drive higher total shareholder returns over cycles.
We balance our return of capital program with disciplined investment in innovative businesses and leading-edge technologies that expand our competitive advantage and increase our market opportunities in the coming years. Our success across multiple business cycles is driven by our well-defined competitive moat, differential technologies, long-term growth potential, and high returns on invested capital. I want to highlight two of the drivers of our leading financial performance. Number one, we've built trust and loyalty with our customers by delivering a superior service focused on their specific needs. And number two, we've strategically expanded in essential areas that grow our technology and service leadership position. Why is this important? When we look at our relative performance in a softening market, our largest customers have grown during this period of industry consolidation, and our percentage of their work has also grown.
This demonstrates the importance of dedicated relationships with customers that are also able to withstand and prosper across cycles and who value quality, safety, and service. Our focus on strategic investment drives the differential experience our customers benefit from today. Focused investments have allowed us to develop new markets and lead technology, innovation, and operational efficiency in the industry. Let me share a few recent examples. Over the past year, Liberty entered partnerships with entrepreneurs to develop the new gas-rich Beetaloo Basin in Australia. We have taken a significant step forward with the arrival of a Liberty fleet in country. Operations are expected to begin next month. Another example is our Liberty Advanced Equipment Technologies, LAT Manufacturing and Assembly Division, that delivered its first DigiPrime pumps in the third quarter. This marks great progress since the launch of LAT just last year.
For the last few years, we have supported our frac operations with the design and manufacturing of Liberty pump technology, including power ends, fluid ends, and ancillary equipment. We are now designing and manufacturing Digi technologies as well as critical components for LPI and PropX. The new LAT organization expands our ability to design, engineer, and package complete proprietary systems. The success of new technology comes through ownership of the engineering design and the ability to rapidly incorporate feedback from field operations. This accelerates the innovation cycle and reduces total cost of ownership. Our manufacturing strategy reflects a balanced approach to in-house versus outsourced production, whereby we can leverage selective key learnings through the innovation cycle with our external partners, which remain an important part of the scale of our manufacturing and assembly needs.
Our PropX division, acquired three years ago, is a leading provider of last-mile proppant handling and delivery solutions and has delivered nearly 400 billion pounds of sand since inception. As the premier provider of wet sand handling technology, we're excited to share several new developments. PropX has recently deployed its new PropStack damp pile delivery system, optimizing the use of damp sand piles for high-throughput frac locations. The innovative new Prop Hopper, together with advanced laser sand metering technology currently in testing, offer additional value to our customers through improved accuracy and simplified on-site operations. We are also in the advanced stages of testing a slurry pipe system for last-mile delivery of sand that could minimize trucking, reduce environmental impact, and provide real, sustainable cost reductions across the value chain.
Earlier this summer, Liberty Power Innovations, LPI, fuel gas operations commenced in the DJ Basin, with first CNG sales in July. LPI's expanded compression and delivery operations in Colorado are off to a strong start, helping bring our frac fleet CNG fueling services to critical mass. We are now supporting most of our gas-burning fleets in both the Permian and DJ Basin. Alongside CNG, we are also treating field gas in the Haynesville, Permian, and other basins for certain customers. LPI handled more gas volumes and delivered more CNG in the third quarter than in its operating history, with much more runway to expand. Today, the rising demand for power in commercial and industrial applications offers compelling opportunities for LPI. We are excited to leverage the expertise that we have built, constructing and managing power plants for frac fleets to additional opportunities, both inside and outside the oil field.
An energy-rich future creates opportunity, as much of the ensuing demand will be meaningfully powered by natural gas, which is an area we believe we have significant advantages. The other opportunity in growing long-term supply of firm power is nuclear, which has been much in the news these days. Our ownership stake and partnership with small modular reactor company, Oklo, has been truly exciting. Oil markets reflect significant uncertainty across the global economy, OPEC Plus production plans, Chinese economic growth, and Middle East geopolitical dynamics. Global demand for oil will grow by approximately one million barrels of oil per day this year and is expected to exceed that rate next year. While global oil production may be in surplus in 2025, oil prices are expected to remain relatively range-bound and supportive of North American activity.
Natural gas prices rose in recent weeks as storage congestion concerns ease due to producer curtailments and strong domestic power generation demand. However, higher prices may incentivize reversal of curtailments and therefore prove to be transitory. The commissioning of LNG export facilities in the U.S. and Canada is expected to stimulate gas activity in 2025 and support higher sustained natural gas demand. Frac markets are navigating the slowing of E&P's operators' 2024 development programs in response to the strong first half 2024 production efficiency gains from factors including producer consolidation, longer lateral wells, and concentration of activity in high-graded acreage. Elevated uncertainty in energy markets has further left operators reluctant to accelerate completions activity in advance of the new year. We now expect a low double-digit % reduction in Q4 activity, a bit more than the typical Q4 softening.
Completions activity likely increases in early twenty twenty-five to support flattish E&P oil and gas production targets. Since late 2023, U.S. crude oil production has been relatively flat and would likely decline if current completion activities levels persist. Eventually, activity levels will likely increase to support growing global demand for oil and natural gas. Frac industry dynamics are poised to improve in twenty twenty-five from today's levels. E&Ps brought wells to production faster this year, in part due to completion efficiencies and increased frac intensity with higher pump rates. Efficiencies were aided by a mix shift towards larger producers benefiting from consolidation and partnership with top-tier frac service providers. Industry-wide frac efficiency is at its highest levels, but we expect the rate of improvement will slow going forward. Higher intensity fracs require more horsepower. Softer activity has been a catalyst for equipment attrition, cannibalization, and idling of fleets.
Together, these imply that the supply and demand balance of frac fleets is tighter than headline frac fleet counts suggest. Large, well-capitalized E&Ps are enjoying attractive economics across a wide range of oil prices. To maintain efficiency gains and further support the increasing complexity of E&P needs, investment is necessary in leading-edge service technologies. Soft year-end frac activity levels are pressuring prices in the near term to levels that are inconsistent with the anticipated market demand and supply of horsepower in twenty twenty-five. It is important that service prices support investment, especially given aging equipment, industry underinvestment in next-generation technologies, and growing fleet sizes. Few service providers are positioned to manage the growing complexities of completion demands with quality service and next-generation technologies.
We are significantly advantaged with our deep customer relationships, leading-edge Digi technologies offering, and the integrated services that enable strong efficiencies for our customers and returns for our shareholders. We remain disciplined in investing in asset deployment as we seek to drive superior long-term financial results. Over the last two years, we have maintained a roughly flat deployed fleet count. However, amidst near-term reductions in customer activity and market pressures, we are planning to temporarily and modestly reduce our deployed fleet count while continuing to support our long-term partners. Looking ahead, we expect to deliver healthy free cash flow generation in twenty twenty-five. Our investment cadence within frac slows following an accelerated energy technology transition push in the last few years. Our strategic investment is expected to shift in support of our growing opportunities for power generation services.
We are well positioned to deliver on our dual priorities of strategic investment and return of capital to shareholders, creating value over the long term. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results and outlook.
Michael Stock (CFO)
Good morning, everyone. Over the past two years, our results demonstrate the hard work and dedication of the Liberty team. We've delivered superior returns during a time when industry activity levels and market conditions have softened from peak levels. We've also strategically used those two years to focus on building our competitive advantages. We embarked on an initiative to transition our fleet to next-generation Digi technologies that are in high demand. We are pleased to share that we are on track to start the year with approximately 90% of fleets, primarily powered by natural gas, with dual fuel and Digi fleets. We also launched and have now reached critical mass in LPI infrastructure to power our fleets. As we look ahead, we are well positioned to drive continued differentiation and solid performance through cycles.
In the third quarter of 2024, revenue was $1.1 billion, compared to $1.2 billion in the prior quarter, representing a 2% sequential decline on pricing headwinds. Third quarter net income after tax was $74 million, compared to $108 million in the prior quarter. Adjusted net income after tax was $76 million, compared to $103 million in the prior quarter, and excludes a pre-tax net unrealized loss of $3 million for mark-to-market loss adjustments. Fully diluted net income per share was $0.44, compared to $0.64 in the prior quarter, and adjusted net income per diluted share was $0.45, compared to $0.61 in the prior quarter. Third quarter adjusted EBITDA was $248 million, compared to $273 million in the prior quarter.
General and administrative expenses totaled $59 million in the third quarter, largely in line with $58 million in the second quarter, and included non-cash stock-based compensation of $5 million. Other expense items totaled $11 million for the quarter, inclusive of the aforementioned $3 million net unrealized loss on investments. Net interest expense of $9 million was relatively in line with $8 million in the prior quarter. Third quarter tax expense was $22 million, approximately 23% of pre-tax income... We continue to expect the tax expense rate in 2024 to be approximately 23%-24% of pre-tax income. Cash taxes were $16 million in the quarter, and we now expect 2024 cash taxes to be approximately 50% of our effective book tax rate for the year.
We ended the quarter with a cash balance of $23 million and net debt of $100 million. Net debt declined by $17 million from the end of the second quarter. Third quarter uses of cash included capital expenditures, $39 million in share buybacks, and $11 million of quarterly cash dividends. Total liquidity at the end of the quarter, including availability under the credit facility, was $352 million. Net capital expenditures were $163 million in the third quarter, which included investments in DigiFleet, dual-fuel fleet upgrades, LAT and Permian facility construction, capitalized maintenance spending, and other projects. We had approximately $4 million of proceeds from asset sales in the quarter.
In the fourth quarter, we expect capital expenditures to be approximately $200 million, based on expected timing deliveries on Digi technologies, completion of dual-fuel technology upgrades, demand for wet sand handling equipment. Our ability to generate strong cash flows through cycles enables our commitment to capital returns. In the third quarter, we repurchased $39 million of shares, or over 1% of the shares outstanding, and distributed $11 million in cash dividends. We continue to deliver on our return of capital program while reinvesting in high return opportunities that increase our long-term cash flow generation. Looking ahead, we are now anticipating fourth quarter seasonality to be more pronounced than typical, as early year E&P production, outperformance, coupled with emerging macroeconomic uncertainties, keep E&Ps hesitant to raise activity ahead of the new year.
While unusually soft year-end activity levels are serving as a backdrop in pricing conversations, these pressures are inconsistent with the anticipated industry demand in twenty twenty-five. We believe fleet activity is now at or below levels required to sustain flattish oil and gas production and are poised to inflect higher in twenty twenty-five. Horizontal rig counts have also stabilized, a signal of bottoming activity in the market. After two years of largely maintaining a flat fleet count, we are now planning to temporarily reduce our deployed fleets by approximately 5%. We will reactivate those fleets to support our customers' long-term development needs in a disciplined fashion. As we invested early in the cycle to build our competitive advantage, transitioning our fleet to next generation Digi technologies, we now expect our capital spending program for our completion services to decline in twenty twenty-five.
As such, we expect free cash flow, as defined as EBITDA less CapEx, to the completions business to increase year over year. We have significant flexibility to maintain strong free cash flow generation and adjust our capital spending targets to fund potential new power opportunities while continuing to support our robust return of capital program. We expect our investments to shift towards growing opportunities for power generation services in the years ahead. We also increased our quarterly cash dividend by 14% to reflect the confidence we have in our ability to invest and expand our long-term earnings, drive free cash flow generation, and deliver a leading return of capital strategy. We combine a cash dividend with opportunistic share repurchases to generate significant value for our shareholders. I will now turn the call back to Chris for a few remarks.
Chris Wright (CEO)
Thanks, Michael. Slowing activity is pressuring pricing levels inconsistent with expected future demand. Let me try to put this in perspective. Our per fleet frac profitability remains above the cyclical high in 2018. This cycle is markedly different than previous cycles, reflecting a far healthier frac market, with perhaps wider differential in profitabilities across the quality of frac providers. Already, we are seeing smaller frac companies fall into insolvency, and most of our competitors' investments in frac equipment are below their attrition levels. Available frac capacity is shrinking. This will lead to tightening in the frac market, even without increasing frac demand. Our competitive advantage is bigger than it has ever been. CapEx in our core business will trend downward next year and in the foreseeable future, boosting our free cash flow.
Liberty Power Innovations is in its infancy, and we have the technology, business infrastructure, and cash flow to develop a high return, sizable diversification to the frac business. However, we love the frac business and have never been more excited about our competitive position and future prospects in frac. I will now turn it back to the operator for Q&A, after which I will have some closing comments at the end of the call.
Operator (participant)
I'll now open the line up for your questions. As a reminder, to ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. But anytime your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And the first question comes from Scott Gruber with Citigroup. Please go ahead.
Scott Andrew Gruber (Analyst)
Yes, good morning.
Chris Wright (CEO)
Morning, Scott.
Michael Stock (CFO)
Morning, Scott.
Scott Andrew Gruber (Analyst)
Wanted to start, you know, on your comments around investment next year. So you even got less CapEx or completions, that'll rise with lower completions CapEx next year. What does it mean for, you know, how many E-frac fleet additions you could target for next year? And it sounds like, you know, LPI investment could go higher next year. So putting those two pieces together, what are your early thoughts on 2025 CapEx? And a wide range is fine. I know we're early, but just curious what that range could be.
Chris Wright (CEO)
Yeah. Thanks, Scott. Yeah, I mean, that level of CapEx that we were discussing then probably has us bring four or five Digi fleets into the market, about just a bit over 10% kind of replacement. So we've probably in 14, you know, sort of 14 to 15 or closing in on 40% at the end of next year, with Digi technologies, just depending on how the fleet configuration goes between simul-frac fleets and others. So I think that's about where we are on that. And then the LPI investments, obviously, you know, kind of early days in looking at the power opportunities. Got a lot of discussions going on there that are quite interesting, and, you know, in reasonably advanced status.
But, you know, that will come clear and probably be a lot clearer by our January call of what those numbers would look like. But we like to kind of think about it for investors to say, you know, we're generating far more we're gonna be generating more cash next year out of our completions business, which is where we're doing at the moment. That also includes the. You know, that number that I gave for the CapEx also includes the base, molecule management, you know, kind of the you know, any expansion that we need for delivering natural gas to support those frac fleets as well. So that's included in what I consider the completions business side of that, you know, and eventually any sort of outside of frac power generation will be something we talk about in January.
Scott Andrew Gruber (Analyst)
Got it. I appreciate that color. And then just to follow up on the near-term dynamics, I guess, one, how should we think about the decrementals in Q4 on that low teens revenue decline? And two, can you offer any early thoughts on the one Q recovery from a revenue and incremental standpoint? You know, a couple moving pieces there in terms of, you know, positive seasonal trend, but I would assume those two fleets you're laying down, you know, probably stay on the sidelines for a bit. And then, you know, could be some additional pricing headwinds. Just trying to level set how we should think about where Liberty starts twenty twenty-five from a revenue and EBITDA standpoint.
Michael Stock (CFO)
Yeah. So, Scott, let me take that one. You know, I think the revenue decline, it will be similar, you know, compared to last year. You know, in the fourth quarter, I think decrementals will be a little higher. You know, that's with kind of as we've sort of looked at, you know, kind of the slow decreasing of pricing and kind of, you know, sort of the dynamics at the end of this year versus the dynamics at the end of last year. So if you even look at revenue and, you know, the revenue of the decrementals there. I think we'll, you know, we'll have activity recovery coming into Q1. You know, it won't be back to Q3 levels.
It'll be between Q4 and, you know, you know, between Q4 and Q3, and the standard incrementals, I would say from there. You know, we'll get as we get closer and closer. We're still in the early part of RFP season, et cetera, but we have a reasonable look at where things are at the moment. And
Scott Andrew Gruber (Analyst)
That's a good color, Michael. Appreciate it. Thank you.
Chris Wright (CEO)
Thanks, Scott.
Operator (participant)
Next question comes from Ati Modak with Goldman Sachs. Please go ahead.
Ati Modak (Analyst)
Hi, good morning, team.
Chris Wright (CEO)
Hi.
Ati Modak (Analyst)
Can you talk about the pricing pressure dynamic in the market? Do you think industry pricing discipline is breaking down? Is there a profitability level or return level on your fleets that we should think of in trying to understand where pricing can go?
Chris Wright (CEO)
Yeah, Ati, I wouldn't. I think discipline breaking down is definitely too strong of a statement, but you get to the year-end, and, you know, there's a number of fleets going down. People's programs are just running out. They may not have gone down yet, but they know they're gonna go down late November or early December after this pad or the next pad. And we do see people trying to fill that gap and keep that, you know, keep that fleet working. So for extra pickup work, pricing is very rough, and unusually rough even. Normally, that's not great pricing, but that's particularly rough. And we're just not gonna play that game. We're just not gonna run a fleet at pricing that doesn't justify running that fleet.
And so, you know, look, we were two years ago, the market condition peaked, and it's been sort of a slow, gradual decline. We've used technology in improving our efficiency and services to try to swim against that tide, offsetting it. I think we obviously continue to do that. But, you know, rig count is plateaued. I think operators probably feel we're at or near a pricing bottom. So yeah, look, we stay tight to our partners. We, you know, we're gonna keep our profitability up and our activity and if we can't, we're gonna take the actions we're taking right now, which is, you know, idle some capacity. We're fine doing that.
But, you know, but conditions aren't great today, but, I don't-- this isn't a normal downturn where it's about to drop and, you know, it's, you know, this is just the first leg down. We're probably pricing-wise-at or near the bottom would be my guess.
Ati Modak (Analyst)
Got it. That's very helpful. And then you mentioned efficiency. You also mentioned that it's at the highest levels, but there is room for some incremental changes, which will be slower. Maybe can you help us understand those changes that would take that efficiency even higher, and what that means for the competitive advantage?
Chris Wright (CEO)
Yeah, look, and I would say our industry, but I would say led by Liberty, are just passionate innovators, right? We're always looking to do something different, to do something better, and that won't stop. But think of the huge changes, you know, in just the last, you know, twelve to eighteen months. You know, we've had some consolidation of significant size companies. What happens then? You know, maybe together they were running twelve rigs, and now they're running nine, and all nine of those are running on the best acreage in the combined portfolio. That increases productivity per well or swims against a long-term degradation in average well productivity that's been going on for six, seven, eight years now. People are going to.
When there's excess capacity and pricing feels off, people go more to Simulfrac, which is really more than one fleet operation. So, you know, it gets counted as one fleet, but really that's one point six fleets or one point seven fleets. So these factors have allowed, in the last couple years, and maybe especially in the last nine months, great increases in efficiency and productivity. This is g reat for our industry, great for the economics of the whole pie, but obviously, in the short term, it's pricing pressure on frac equipment. We're just getting more done with the same amount of horsepower. The decline in fleet count is roughly half offset by growth in the average fleet count size. So horsepower that's being run has not declined by as much as frac fleet count has declined.
But yeah, I would say what makes us feel better about the marketplace is the differential in the profitability, say, of Liberty versus the, you know, smaller privates you don't even know that are out there, and they're part of the marketplace. They are truly struggling. Some of those companies are drying up, shutting down operations, going into bankruptcy or just sort of holding their cards and selling their assets away to someone else or shutting them down. So we see that generation, that shrinkage in capacity in the marketplace. That's what it takes to fix a market where supply and demand are a little bit out of whack. But and I probably actually addressed not as much on your technology thing.
I don't know if Ron wants to add into that, but optimizing supply chain, AI for routing truck delivery, how do we maximize the life of an engine? How do we increase gas substitution, so we can bring a greater fuel cost savings to ourselves and to our customers? A lot of technical efforts going on. I ended up talking too long. Ron, I don't know if you wanna add anything or if we move on.
Ron Gusek (President)
I think you hit all the high points, Chris.
Chris Wright (CEO)
Thanks, Ron. Thanks, Ati.
Ati Modak (Analyst)
Thank you, guys.
Operator (participant)
Okay, our next question comes from Stephen Gengaro with Stifel. Please go ahead.
Stephen David Gengaro (Analyst)
Thanks. Good morning, everybody. Two for me. I'd start just back on the pricing question. When you talk about dedicated fleets with customers, do these prices roll at this time of year, or they roll throughout the year? And just as an add on to that, do you expect any material deterioration in pricing on for that part of the business?
Chris Wright (CEO)
You know, those are all different. Some of them, it's fixed for a year. Some of them it has, you know, twice a year or even quarterly adjustments based on some factors. Those adjustments aren't big, and there's usually caps on how much that can move up or down. So there can be movements, but they're not huge. There is some rebidding going on now, you know, for a new contract starting in January. Not everybody does it on the calendar year, but a lot do. So there's... and that's the negotiations and dialogue we're having right now with our customers. You know, we have long-term partners. They appreciate the efficiency and the quality of us working together. Those relationships are gonna continue. But are other bids coming in that are, you know, that are lower, that pressure that dialogue a little bit? Sure.
But that's been going on for two years now.
Stephen David Gengaro (Analyst)
Great. Thanks. And the other one is: when you. We, you know, we hear all about, you know, energy demand and for AI data centers, et cetera, and I know about the investment and partnership with Oklo, and then you sort of think about the LPI business. Or is the LPI sort of end market similar to sort of where SMRs will be playing? Or is there any way that you could help us sort of start thinking about what kind of end market you'd be after on the LPI side?
Chris Wright (CEO)
You bet. Yeah, the both of them are aimed at what I would call ten plus years, and in some states, more than that, of just sort of bad electricity policy that has driven up the price of electricity and driven down the stability of the grid. You know, that is. You know, you look at California's electricity prices. You know, they've doubled with actually no increase in demand at all. High prices just pushed the industry out of California, but they've still driven up their prices. Now, nationwide, we're about to see the first meaningful growth in demand in electricity in twenty-five years. So yeah, they're both targeted at that. But think of Oklo, they're gonna be fixed on location. They're gonna be built somewhere. They could be on the grid, they could be behind the grid, but they're gonna be fixed.
So data center is a huge target market for that, other industrial facilities. LPI and our natural gas-generating assets, you know, they're, they're on wheels. They could be supplying a data center that's, you know, 18 months behind or 24 months until it gets a grid connection, but they're not, they're not likely to be parked somewhere for 20 years, or the nuclear power plant is gonna be there forever. So they could be in some of those same markets, but they also have the flexibility to move where there's power dislocations. So we're, we're figuring that out. The interest in them is just tremendous. What we've got to figure out is, yeah, we only got a limited amount of assets, and we're only gonna build a limited amount of capacity. Where's the best and highest use of those fleets?
There's some overlap, but there's very different capabilities between the two. I think the overlap will probably be more the exception than the rule. Excited about the opportunities for both. For both.
Stephen David Gengaro (Analyst)
No, great. Thank you for the color.
Chris Wright (CEO)
I would throw Fervo. Fervo's, you know, electric generating capacity from next generation geothermal, they're plugging into that same market. Those are more long-term contracts to utilities, but and maybe. But that's another business that Liberty is a partner in, that I think has got pretty bright prospects addressing the same problem, but in a slightly different way. Thanks.
Stephen David Gengaro (Analyst)
Thank you.
Operator (participant)
Next question comes from Saurabh Pant with BOA. Please go ahead.
Saurabh Pant (Analyst)
Hi, good morning.
Chris Wright (CEO)
Good morning.
Michael Stock (CFO)
Good morning.
Saurabh Pant (Analyst)
Chris, maybe I want to dig in a little bit on your comment on, I think you said, the pricing pressure is inconsistent with the anticipated supply-demand balance next year, right? So I'm just thinking forward from there and thinking, if that's the case, that's your view, then how do we think you approach your contracting strategy for twenty twenty-five? Basically saying, do you want shorter term contracts with more reopeners just to get the upside potential in the back half of twenty twenty-five? Or do you look to sign up contracts with relatively fixed, stable pricing? Again, relative is the word, right, for most of twenty twenty-five. How do you approach that?
Chris Wright (CEO)
Great, great, great question. So if we're gonna build a new fleet for someone, that's gonna have locked-in pricing that guarantees it makes sense to deploy the capital and build this fleet. It may have reopeners that can move that price up, but it'll certainly be structured in a way that that price will not degrade to make that investment a bad investment for us. But there's a lot of interest with producers right now. Of course, now for new fleets, they're not going out at, you know, poor pricing. None of them, zero of them. But for legacy equipment, there is some tough pricing going on in that world. We do have some assets like that.
So it's possible with partners there, we would make price adjustments for a dedicated fleet that would just be structured such that they move up as the market firms. You know, in a slow and gradual partnership way that, you know, we've been doing since we started the company. So yeah, it depends on asset type, depends on customer, depends on duration. So it is a wide range of things going on, and that's part of the Liberty thing. Different customers have different needs and different priorities, and what we do is just engage with them candidly and find out the right way to structure it, that we're comfortable with, that works for them. And if we can't, again, we're willing to idle capacity, but there aren't many players out there that want to move away from their partnership with Liberty.
That's a vanishingly small list.
Saurabh Pant (Analyst)
Right. No, that makes a lot of sense there, Chris. Thanks for that. And Mike, maybe one for you. In the press release, you mentioned a healthy free cash flow for 2025. If you can help us think through the pieces as we think about 2025 from a free cash flow perspective, what things should we be mindful of, as we try to build that up?
Michael Stock (CFO)
Yeah. So, I mean, as we've talked about, we're gonna be managing CapEx down in our completions business. You know, we'll look at replacing four to maybe five DigiFleet fleets, kind of, you know, the 10% attrition cycle, the kind of natural cycle, maintenance capital in that business. A lot of our, you know, our sort of all of our investments in dual fuel, that will be completed in the fourth quarter, and a number of other, so new blender technologies, et cetera, some of those investments we made with PropX and the wet pile handling to support clients there. So, you know, we'll see that CapEx comes down, which obviously is the biggest part of it, as it offsets, you know, kind of a, you know, a decline in EBITDA.
You know, I think what you'll see is you're gonna see kind of a slight raise in cash taxes. You know, we're running about 50% of our tax rate. We will run, I think, about 100% of our book tax rate next year, by the looks of things. Interest will remain relatively flat. You know, given the fact we're gonna have a quietest Q4, you're gonna see working capital fluctuate during the year, but I would expect that, you know, over the whole year, next year, working capital will be relatively flat on that side of the business. You know, obviously, the largest portion of our free cash flow at the moment and very much going forward.
Chris Wright (CEO)
You know, we can easily support the same strong return of capital to shareholders that we're doing now, and would expect that to continue.
Saurabh Pant (Analyst)
Okay, perfect. No, that's all very useful, color, Mike. Thank you. I'll turn it back.
Chris Wright (CEO)
Thank you.
Operator (participant)
Next question comes from Marc Bianchi with TD Cowen. Please go ahead.
Marc Gregory Bianchi (Analyst)
Hi, thank you. Maybe Michael, just to follow up on the capital spending for next year. It wasn't clear to me, do you expect the CapEx dollars to be higher or lower for the total company?
Chris Wright (CEO)
Lower for the completions business. Obviously, you know, the power generation opportunity is still to be clarified. You know, that we'll talk about. I mean, I would expect that, you know, within the realm, I think it probably would be slightly lower, unless there's really exciting and very large power generation opportunity. But generally, I'd say it will be down slightly. It'll be down significantly in the completions business. But, you know, a good portion of that may, I would say, until we get made up in the, you know, the outside of frac power generation business. That's still to be thought about and going and decided upon, and you'll see announcements around that as we go through the quarter into the January call.
Marc Gregory Bianchi (Analyst)
Yep. Okay, that was gonna be my next question. The other one that I had was just on the revenue progression here. So, the activity is down low double digits, but it sounds like your revenue is down also low double digits, but there's some pricing weakness. So I would have thought that, you know, the revenue decline is more than the activity decline. So maybe you could talk about that and, you know, how that progresses into 1Q. I know you said activity is up in 1Q, but not quite to 3Q levels.
Chris Wright (CEO)
Yeah.
Marc Gregory Bianchi (Analyst)
But there's pricing component we probably need to be considering too, right?
Michael Stock (CFO)
Yeah. There's a lot of sort of mix issues that happen, sort of, you know, when you look at sort of an activity decline versus the revenue decline. So it depends on sort of where things are going on, you know, certain parts of, you know, kind of the mix of the business. So it happens that those two will be pretty similar in Q4. As you'll see, there's a pricing element in there. You know, sort of, there's some offsets, obviously, because, you know, as I've said, you know, the decrementals will be slightly higher in Q4 this year, with a similar revenue drop than it was Q4 last year.
So you can basically read through that there is a little bit of a pricing sort of element to that, that's kind of increasing those incrementals. Yeah, and I'd say, you know, as we say, I think what we're gonna see is we're gonna see things come up, you know, Q4, Q1 to come up sort of between Q4 and Q3. And I think you'll see, you know, we'll kind of get some clarity around that as we get through pricing season, you know, how that falls through to earnings. But I'd say kind of modeling it in that medium point. We see total activity, you know, really for the whole industry, you know, at, you know, kind of pretty much equal lateral feet next year versus this year, right?
That's where Chris talks about this, you know, the fact that, you know, the pricing pressure at the moment is kind of inconsistent with the future demand, right? I mean, when you look at this thing, you know, kind of the amount of demand for this whole year, the whole of next year is gonna be similar. You know, so if you think about the limited number of supply of frac fleets, the increased attrition really that's going on, and the larger amount, you know, the sort of more complex fracs, you know, we have got a slightly tightening market. You know, hence the reason that we see that improving, probably improving on a pricing matrix as we go through the year. I think it's gonna naturally happen. It is one, you know, I think we've talked about this with a number of folks.
There's a, you know, a flavor of, you know, the end of 2021, 2022 in here. You know, and I think you may have remembered, if you go to our September call, we had six fleets we weren't working, and we said we weren't bringing them out because the bid in the market was weaker than it should have been. And I think you can kind of look back at when we brought those fleets out in April, they came out at significant profitability increase, right? In a very short period of time. Because market sentiment caught up with the realities of the underlying supply and demand. Now, it's not going to be that extreme next year, we don't think, but there is going to be a flavor of that in this.
Yeah, so it's gonna be a little dynamic as we go through the year. But the great thing about that one is-
Marc Gregory Bianchi (Analyst)
Yep, the strategy makes sense.
Michael Stock (CFO)
We manage it better free cash flow next year than we will this year on that side of it.
Marc Gregory Bianchi (Analyst)
Yep, the strategy makes sense. If I could just squeeze one more in.
Michael Stock (CFO)
Yeah.
Marc Gregory Bianchi (Analyst)
How indicative do you think your experience here into year-end is for the broader industry? And I'm wondering if there's, you know, Liberty specific things. You've got your sand business, you've got some wireline. Are there things happening in those parts of the businesses that, you know, might cause you to be different than sort of the broader frac industry, as we think about the implications for other companies into Q4?
Chris Wright (CEO)
I think the short answer is we don't know. It's hard to say. There's just a lot of moving pieces, but, you know, I think what we're seeing is reasonably indicative of the whole marketplace, but definitely, you know, our business is dictated by our relationships with our customers and other people's businesses, you know, so yeah. I don't think it's probably far off from the overall macro, but, I guess we'll see in the coming weeks.
Marc Gregory Bianchi (Analyst)
Yep. All right, Chris, thanks a lot.
Chris Wright (CEO)
Thanks.
Operator (participant)
Next question comes from Keith Mackey with RBC Capital Markets. Please go ahead.
Keith Mackey (Analyst)
Hi, good morning. So it looks like CapEx for this year ends up at around $650 million. Could you maybe just talk a little bit about what the frac portion of that would be, and what portion of that would be maintenance CapEx?
Michael Stock (CFO)
Yeah, so I think this year, probably maintenance CapEx, you know, so, you know, obviously, maintenance CapEx is a big part. Frac is a big part of the maintenance CapEx. But maintenance CapEx is probably, you know, below two hundred, say one seventy-five, you know, plus or minus, on that side of the business. You know, we've had a pretty significant investment in LPI, some in the wet sand handling side of the world. And then we've had a significant amount of, you know, dual fuel upgrades, DigiFrac, and, some other underlying technology on the blender side, of upgrades that went on this year. So that's the bulk of it.
Keith Mackey (Analyst)
Okay, got it. And just to follow up, would it be fair to assume then that next year, your maintenance CapEx in the frac business is roughly similar to that, and then you add four to five DigiFleet at maybe $50 million each, and your total frac CapEx ends up $400 million-$450 million? Is that how we should be thinking about it at this point?
Michael Stock (CFO)
You're in the general realm of sensibility there. Yep.
Keith Mackey (Analyst)
Yep. Okay. And just one more, if I can. Just to maybe put some of the commentary into numbers for Q4. It looks like, with the revenue decline being similar year over year and the higher decremental, like, we should be getting somewhere between 170 and 180 million of EBITDA. Is that also in the right ballpark there, Michael?
Michael Stock (CFO)
Reasonable estimation.
Keith Mackey (Analyst)
Okay, that's it. Thanks very much.
Operator (participant)
And the next question comes from Jeff LeBlanc with TPH. Please go ahead.
Jeffrey Michael LeBlanc (Analyst)
Good morning, Crescent team. Thank you for taking my question. I just wanted to follow up on the comment on, on CapEx of Q4, $200 million. I'm just curious if you're pulling forward CapEx from 2025 or what's causing the increase? Because I believe on the prior call, you, the estimate was $550 million for the full year. Thank you.
Michael Stock (CFO)
Yeah, it's deliveries. It's kind of a combination of sort of, you know, I think there's been a lot of debottlenecking going on in some of our delivery partners. I think we had they had some fairly significant issues around their assembly lines and kind of. And so there's a lot of that debottlenecking was happening at the end, through the back end of summer, the early part of fall, you know, and I think they've got that together. So I think the delivery cycle and ergo the sort of, you know, where things were gonna fall as expectation is reasonable. And then we've sort of had some extra wet sand additions and another few other things that kind of have added to the Q4 that have probably added, you know, of order of those things.
Jeffrey Michael LeBlanc (Analyst)
Thank you very much. I'll turn the call back over to the operator.
Chris Wright (CEO)
Thanks. Thanks, Jeff.
Operator (participant)
Our next question comes from Roger Read with Wells Fargo. Please go ahead.
Chris Wright (CEO)
Hey, Roger.
Roger Read (Analyst)
Hey, good morning, guys. Just wanted to kind of follow up on some of your comments about, you know, this, call it, seasonality or CapEx exhaustion issues next month and into December. You know, one of the things we hear from the E&P companies is that they like to, you know, pursue this productivity and efficiency, and it requires pretty consistent operations. Does the opening in, you know, call it, activity levels or jobs reflect kind of a mix? Is this mostly smaller private E&Ps? Is it, you know, guys exposed more to gas, where maybe it makes sense to take a little time off here? Or are you seeing this across, you know, kind of the entire area of operations, meaning, you know, large E&Ps all the way down to the small privates?
Chris Wright (CEO)
I think you've given a reasonable summary, Roger. It's mostly smaller. It could be small publics. The very biggest players, I would say for sure, are the most steadfast in keeping things going, keeping efficiency on track and not ceasing operations. But even those, you know, occasionally they'll be, you know, geez, we're too efficient, so there's a frac holiday, you know, a brief break. But I would say, yeah, it's mostly smaller players. Definitely, it's gas players. You know, gas has been a hard thing to predict, and plans have evolved a lot over the last twelve to twenty-four months with the gas players. So yeah, I think your summary at the beginning was reasonable.
Roger Read (Analyst)
So are you implying that it's gonna become easier to forecast gas after twelve months?
Chris Wright (CEO)
Yeah. Well, that good humor, but again, as you've seen, we're probably at a level of gas activity right now, you know, that's below even keeping production flat. So no, it's not gonna be easy to predict it, but instead of a bouncing trend down, it might be more of a bouncing trend up.
Roger Read (Analyst)
Yeah, I'm just checking you there. I was trying to make sure you were still standing on two feet. The other question, I know we understand, you know, completion CapEx will likely trend lower. But if we were to see, you know, let's call it, a solid move up or a solid move down in commodity prices, what is your flexibility to either defer spending or to pull spending forward as you look at the supply chains out there?
Michael Stock (CFO)
Yeah, I mean, we've got very strong ability to defer or but bring spending forward. But that said, it you know really has sort of a you know three- to five-month window you know sort of as far as deliveries goes. You can defer deliveries. You know, we've done that before. You think about closures, you know, we you know we pushed off deliveries, and we pushed those off nine to 12 months you know in partnership with our people. So you know in extreme circumstances, but in general, you've got a three- to five-month window there where you know it's not gonna change. But you can meaningfully change CapEx within a 12-month period.
Roger Read (Analyst)
Okay, great. Appreciate it. Thanks, guys.
Chris Wright (CEO)
Thanks, Roger.
Operator (participant)
Our next question comes from Waqar Syed with ATB Capital Markets. Please go ahead.
Waqar Syed (Analyst)
Thank you very much. Good morning. Chris, I just wanted to get a sense on, you know, by when do you think LPI could have a material impact on the revenue line, that would be maybe, you know, something that 10% of revenues could be LPI. Is that like a 2-3 years out, or is it be looking at 5-6 years out? Any guidance on that would be helpful.
Chris Wright (CEO)
Yeah, well, it's not five to six years. It's certainly faster than that. But you know, for us, as with our core frac business, it's always more about doing it right than doing it big or doing it fast. So but two to three years is probably not unreasonable expectation.
Waqar Syed (Analyst)
Okay. And then from a activity perspective, pumping activity perspective, for next year, you're mentioning that you see activity needs to go up to maintain crude oil production. Where do you expect activity to pick up? Do you think it's going to be mostly Permian, or do you think Bakken and Eagle Ford also sees some activity increases? And then when do you expect Haynesville activity to kind of pick up?
Chris Wright (CEO)
Wow, those are all the hard questions, Waqar. But you know, I think it will be across basins for sure. You know, obviously, some of the northern areas they slow down naturally in the wintertime. So you know, Q1 is often a little bit slower in northern regions for weather, you know, and Q2 and Q3 are busier. Permian doesn't really have a weather cycle per se. But you know, it's certainly commodity price dependent. You know, look, if oil prices move, it doesn't wildly change things, but on the margin, it does. We'll start a little earlier, we'll do this. So look, I think in general, across the basins, look, we're in Q4 right now.
In general, if we look out six months from now, I think the average level of activity in the oil basins, it'll be up from where it is today. How much is yet to be seen, but it, it'll be up from where we are today. And gas basins, that's probably a reasonable assumption as well. It's just activity is very low right now. We got some great competitive advantage there. So I mean, like, our market share, our gas activity today is not insignificant, but it's not huge, but our market share is big. So if that, gas activity is maybe a little higher six months from now, maybe meaningfully higher twelve months from now, but that's just a guess. That's just a guess. I shouldn't. I probably shouldn't be predicting that too much.
Waqar Syed (Analyst)
Okay. And then the pricing pressures that you're seeing, is that now across entire fleet, or is it still more on the Tier 2s, and maybe Tier 2 dual fuel as well? Or now it's permeated to e-fleets and Tier 4 DGBs as well?
Chris Wright (CEO)
You know, it's certainly strongest in legacy equipment, the least desirable equipment. That's where attrition is being driven, of equipment being retired there as well. The high-end natural gas running fleets are, you know, much more desirous, but yeah, when you've got a softest market, there's a little bit of pressure everywhere. A new build fleet, we wouldn't do a new build fleet without great economics, so yeah, not so much change at the top, but not zero.
Waqar Syed (Analyst)
Great. Well, thank you very much. Appreciate the color.
Chris Wright (CEO)
Thanks, Waqar.
Operator (participant)
Our next question comes from Tom Curran with Seaport Research Partners. Please go ahead.
Thomas Patrick Curran (Analyst)
Good morning, guys. Thanks for squeezing me in. You know, Chris and Michael, in addition to everything you've accomplished via ever better execution and technology out in the field, as Chris, you know, gave a comprehensive overview earlier in the call, you've also been pulling different levers internally to protect and sustain your record profitability amidst this long, grinding downtrend in frac pricing. At this point, which ongoing initiatives do you expect to provide the most support to margins? Have you identified any new efficiency or cost out opportunities that have yet to be meaningfully realized?
Chris Wright (CEO)
I'm gonna. Look, there's so many incremental things. I'm gonna turn it over to Ron, and he can... You know, we have medium-term projects and long-term projects. But you're right, and I appreciate you pointing them out, that is always an effort for us. We don't control the marketplace, but we do drive our own self-improvement, and that's always in two buckets. That's how can we deliver a better service to our customers, and how can we do the same thing more efficiently, cheaper?
Ron Gusek (President)
Yeah, I mean, certainly a number of areas of focus there for us. Obviously, on the DigiFleet side of things, the maintenance outlook changes pretty meaningfully. We're building an asset there that is longer lived, and that's true on both the DigiPrime and the DigiFrac side of things. If you think about the electric side of things, of course, the maintenance profile looks very different there, both on the pump side and on the power generation side of things. And the same is true in the DigiPrime world. We're building an asset there that has a very different maintenance profile than our historical diesel assets. And so, a lot of work that's been going on in that regard.
We're certainly taking those learnings and applying them throughout the fleet as we advance our machine learning capabilities around our ability to understand how an asset is performing and respond to that in the field. Lots of other work going on that ultimately changes our outcomes. Automation has been a big thing. We've been focused on automating the operation of our fleet, all the way from the sand handling side of things through the chemistry side of things and into the pump side of things. An immense amount of work going there. You can imagine that as we continue to automate these things, we improve operations out there. You see that both in our efficiency, but you also see that in the maintenance profile for the assets.
A huge amount of work on the logistics side of things. We've got Sentinel out and running across the board from a sand handling standpoint. That has dramatically changed our efficiencies from a sand handling and trucking measure. We're probably down about 30% in the number of trucks required to move sand to a location versus pre-Sentinel deployment. We're rolling that out across our LPI division as well. We're using that same technology to manage our gas deliveries and improve the efficiencies there at the same time. You're gonna see us our percentage of fleets working in the simulfrac space climb over the coming year as well.
We probably just by virtue of our customer base not had as high a percentage of our fleets working in that space as some others have, but that's climbing for us in the coming year as well. And so of course we've seen efficiencies come as a result of that on a per lateral foot per hour completed basis, and we're gonna feel the benefits of that as we head into next year too.
Thomas Patrick Curran (Analyst)
Got it. A lot to chew on there. Thanks, Ron. And then just, with LPI, you know, you guys have once again skated to where the puck is headed in terms of the need for a technology solution, in this case, you know, for next gen power support and logistics out in the field. Looking to twenty twenty-five, could you share any quantified targets or expectations you have for LPI, be they operational or financial?
Michael Stock (CFO)
You know, no, I mean, that's the clarification over the Q4 guidance. I mean, that is, as we've said, you know, this is something that we'll discuss in the January call. So, you know, we'll kind of look at that and, I think, you know, kind of a more holistic view of what that business will look like.
Thomas Patrick Curran (Analyst)
Okay, but it sounds like there is more coming that we can look forward to there, Michael.
Michael Stock (CFO)
There certainly is. We're very excited about it, but as you know, you know, we're not in the vaporware. We very much, you know, we talk about things. We're the tortoise, not the hare. We talk about things when they're ready to go, and we may not be first to market, but we always seem to end up winning.
Thomas Patrick Curran (Analyst)
I appreciate that. Thanks for taking my questions.
Chris Wright (CEO)
Thanks.
Operator (participant)
The next question comes from Eddie Kim with Barclays. Please go ahead.
Eddie Kim (Analyst)
Hey, good morning. Just thanks for squeezing me in here. I'll just keep it to one question. But just wanted to dig into the softness you're seeing in 4Q a bit more. It just feels like the market has softened pretty substantially over the past three months. So could you talk about, you know, what's really surprised you or what got much worse than you initially expected back in July? Is it mainly kind of the volatility in oil prices that's causing operator uncertainty, as you mentioned, or operators, you know, reaching their production targets for the year earlier than expected? Just any color on what the main negative surprise was for you guys over the past three months?
Chris Wright (CEO)
I'd say a little bit of both. You know, think of consolidation. You bring acreages together, and now you are mostly drilling two miles, and now you've by early this year, you started drilling a lot of three and four-mile laterals, and they worked. They worked well. Efficiency got them done quickly, well, production came on strong. So I think part of it is some positive on productivity efficiency gains from bigger operators focusing in the, in the sweet spot. So I think that's a good chunk of it. Definitely, the softening in oil prices on a margin, like, were we gonna kinda hang here or take a little break? Maybe we're gonna take a little break. So it's a little bit of both of those.
But when you think of the productivity gains of the wells, a lot of that's kind of one-time big gear shifts. In general, next year, the average quality of a drilling location is gonna be lower than it was this year, and three or four years from now, it's gonna be lower still. That doesn't mean the shale revolution is ending. It just means we'll see a continued migration up in frac intensity. Or maybe another way to say it is, we'll see a continued migration in that more pounds of sand have to be pumped underground on an annual basis to get the same amount of oil out of the ground on an annual basis. So we have a longer-term macro trend that's sort of modestly positive, but in the short term, we were sort of victims of our own success.
A little bit increased well productivity and the pricing on as well. A little bit of both.
Eddie Kim (Analyst)
Got it. Understood. Thanks for all that color, Chris. I'll turn it back.
Chris Wright (CEO)
Thanks.
Operator (participant)
Our next question comes from John Daniel with Daniel Energy Partners. Please go ahead.
John Daniel (Analyst)
Hey, good morning. Thanks for including me. Chris, as you probably know, there are a number of E&P management teams that now have private equity backing and should probably start up in 2025. I'm just curious if that is factored into your 2025 outlook, and presumably, that would drive upside to your spot market view. Yeah, definitely not driven into our views right now. We certainly are in dialogues with lots of them. They're people we know.
Yeah.
Chris Wright (CEO)
Yeah, and, you know, a smaller number of teams, but there's a fair amount of dry powder looking for divestitures and opportunities to get assets. So yeah, look, as a lifelong entrepreneur, that's exciting.
John Daniel (Analyst)
Yeah.
Chris Wright (CEO)
But, but John, no, not, not baking in any of that happening. But yeah, some of that's eventually gonna happen. Absolutely.
John Daniel (Analyst)
Right. And then, Michael, you touched on the possibility of pricing improvements next year, and I think the attrition story is real. Bankruptcies, liquidations are happening, perhaps some consolidation and then a rise in spot market activity as new players emerge. It would seem to me that when that all happens, all else being equal, it's the pricing recovery is probably not low single digit, but something perhaps more substantial, at least in the spot market. Is that a fair assessment?
Michael Stock (CFO)
You know, there's certainly one way you can look at it. If you look at the 2021, 2022 example,
John Daniel (Analyst)
Yeah.
Michael Stock (CFO)
Yes, we've got some historical, some recent historical kind of evidence of that. So, yeah. So I think we'll see what it is when it comes. As you like to say, I think, as we said, you know, it's unnaturally soft in that, in the market at the moment, and the animal spirits will take hold, and.
John Daniel (Analyst)
Yeah
Michael Stock (CFO)
I think, we may see improvement next year.
John Daniel (Analyst)
Okay. And this is probably a leading question, so I apologize, I guess. Maybe not. But if I were modeling 2026, which I'm not, doesn't this flow through, coupled with lower RM, the rise in LPI, and eventually as higher call on OFS activity, given lower quality rock, it would seem that you could have a material improvement in 2026 versus 2025?
Michael Stock (CFO)
That certainly would be a very reasonable assumption.
John Daniel (Analyst)
Okay, and then the last one for me. Sorry to be a question hog, but I think there was a question early on the power generation CapEx. As we talk to people on that side of the business, it would seem that, you know, those, that CapEx would likely be back with contractual support, perhaps longer term than what you normally see in the frac market. Is that a fair assessment?
Michael Stock (CFO)
Yeah, that is a fair assessment.
John Daniel (Analyst)
Okay. That's all I got. Thanks for including me.
Chris Wright (CEO)
John, appreciate you driving around and visiting everyone in the field. That's much appreciated by everyone.
John Daniel (Analyst)
Thank you. Thank you. See you guys.
Operator (participant)
This concludes our question and answer session. I would like to turn the conference back over to Chris Wright for any closing remarks.
Chris Wright (CEO)
Thank you. Thanks for joining us today. Since the first edition of our Bettering Human Lives report, we have raised awareness of energy security. In January this year, we took important, deliberate steps to address global energy poverty by launching the Bettering Human Lives Foundation to address a major fixable problem: the over two billion people who lack access to clean cooking fuels, and therefore cook every meal using wood, charcoal or dung. This problem results in over three million annual preventable deaths from indoor air pollution, more than malaria, AIDS, and tuberculosis combined. I view this as the largest fixable problem, with so far very little concerted efforts to address it. The Bettering Human Lives Foundation has created active partnerships and provided loans to entrepreneurial businesses in both Ghana and Kenya to increase access to clean cooking fuels.
In Ghana, our partner has built propane cylinder exchange cages to get propane into communities. In both countries, our partners will convert large boarding school kitchens from burning copious amounts of wood to clean burning propane for student meals. Thousands of student lives will be improved with each conversion made. Further, our partnership with an innovative American company will soon, early in twenty twenty-five, dramatically lower the barrier to entry to switching to propane stoves. It will allow the piecewise selling of propane contained in large cylinders, allowing consumers to pay a small amount each time they cook, as opposed to having to upfront purchase for nearly a month's supply. This is a major barrier to entry for families who otherwise would make the switch to clean cooking fuels. By reducing the upfront payment by a factor of ten, this could be transformative in speeding adoption of clean cooking fuels.
We are also partnering with the same American stove manufacturer to open a facility in Ghana to produce these stoves locally, lowering costs and growing supply. You can find out more about all of this at betteringhumanlives.org. The American Shale Revolution has dramatically increased waterborne global propane supplies. Our aim is to bring the benefits of this surge in new supply to those desperately in need of clean cooking fuels. My heartfelt thank you to all of our existing and future partners in this life-changing endeavor. And if you're in Colorado this weekend, please join us for our inaugural 5K run, supporting the Bettering Human Lives Foundation this weekend. Have a great day, everyone.