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Christopher Wright Talks About the Slowdown in Fracking

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Christopher Wright

Good morning, everyone, and thank you for joining us. We’re pleased to discuss with you today our second quarter 2019 results. We’re proud to have delivered $0.32 fully diluted earnings per share in the second quarter, a 23% increase compared to $0.26 in the first quarter of 2019. Revenue in the quarter increased 1% to $542 million and adjusted EBITDA increased 9% to $19 million, each as compared to the first quarter of 2019. We were able to deliver this financial performance due to the continued executional excellence of our operations and supply chain teams plus close coordination with our customers on schedule.

Liberty’s operational teams in the field continued to excel in delivering the safest and most efficient service to our clients. This cements the strong relationships that we have with our customers and helps them bring the most cost-effective barrel of production to the market. These strong financial results enable us to continue to improve service quality, grow organically and return capital to stockholders.

For the 12-months ended June 30, 2019, we achieved a pretax return on capital employed of 23%, generated significant free cash flow and returned over $130 million to stockholders. Our first half of 2019 results reflect the strong demand for Liberty’s differential frac services. Based on visibility into our customers’ activity pipeline for the year, we believe demand for Liberty fleets will remain high through the third quarter. And we are working closely with our customers to mitigate the effect of operator budget exhaustion towards the end of the year. As in the start of 2019, we expect demand for Liberty’s services to be strong at the start of 2020 when operator budgets are renewed.

Operators are managing activity to not exceed their announced budgets. And therefore, the frac market will most likely experience utilization challenges in the fourth quarter of 2019. There continues to be an oversupply of frac fleets in the market, which is holding down pricing. We would not expect pricing to improve until the supply of actively staffed frac equipment balances with demand.

  • Among 4 analysts covering Liberty Oilfield Services (NYSE:LBRT), 3 have Buy rating, 0 Sell and 1 Hold. Therefore 75% are positive.

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Liberty Oilfield Services

A Perfect storm is approaching Liberty Oilfield Services

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The Permian Basin is responsible for the greatest oil production gains in the U.S. in recent years. Over the past eight years, there has been phenomenal production growth in the Permian.

But recently a number of reports have highlighted a slowdown in U.S. shale oil growth. But Why? it’s not for lack of oil. In its most recent Drilling Productivity Report, each of the six regions tracked by the Energy Information Administration (EIA) — Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara, and Permian — still showed a year-over-year increased in oil production. – forbes

But Wallstreet is demanding more “Free cash flow” from producers in the Permian Basin, that along with the Anti Fracking Officials in Colorado going after the oil industry, it looks as if  A Perfect storm is approaching Liberty Oilfield Services.

This week The Colorado Oil and Gas Conservation Commission (COGCC) reaffirming its regulatory authority over oil and gas development in Weld County in a letter sent Monday from the commission’s attorney to the county’s attorney.

Liberty Oilfield Services biggest competitor Haliburton announced it was cutting back its fracking workforce.

 

Liberty Oilfield Services Stock

Liberty Oilfield Services declares $0.05 dividend

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Liberty Oilfield Services

Natural gas fracking fleet : A look at Liberty Oilfield

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Despite facing a challenging market, we are proud to have delivered a sequential 13% increase in revenue to $535 million and adjusted EBITDA increase of 18% to $85 million and a net income before income taxes increase of 27% to $41 million after adjusting for gain loss on disposal of assets. – Chris Wright

There is a lot of things to like about dual fuel. Number one on that is natural gas is cheaper than diesel, right? So, when you’ve got availability to natural gas, it’s a cheaper way to run a frac operation. Definitely, it’s got lower emissions, and again, not just in CO2 emissions, but SOx and NOx and particulate emissions. So, look, in a perfect world, look at United States electricity grid, right? We don’t use oil to make any electricity, and natural gas is our biggest source. So natural gas is a preferred fuel. Close to half of our fleets or pumps are dual fuel, so we’re not running at that level today because to do that, you’ve got to have gas in the field, right, so probably only half of our dual fuel fleets are actually running with that capability, but certainly, we hope to see, we expect to see and we work with our customers to see an increasing consumption of natural gas to power like to power frac fleets. – Chris Wright

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