Liberty Energy Inc. — Q1 2024 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2024, compared with Q1 2023. Liberty provides hydraulic fracturing and related services and technologies to North American oil and gas producers, operating as one reportable segment.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1,073.1 million | $1,262.1 million | Down 15.0% |
| Operating income | $115.4 million | $225.1 million | Down $109.7 million |
| Net income | $81.9 million | $162.7 million | Down $80.9 million |
| Diluted EPS | $0.48 | $0.90 | Down $0.42 |
| EBITDA (non-GAAP) | $238.6 million | $319.5 million | Down $80.9 million |
| Adjusted EBITDA (non-GAAP) | $244.8 million | $329.9 million | Down $85.1 million |
| Operating cash flow | $159.4 million | $203.9 million | Down $44.5 million |
| Capital expenditures paid | $145.0 million | $133.1 million | Up $11.8 million |
Margins. Calculated from reported figures, operating margin was approximately 10.8% versus 17.8%; net margin was 7.6% versus 12.9%; and Adjusted EBITDA margin was 22.8% versus 26.1%. Cost of services, excluding depreciation, was $782.7 million, or 72.9% of revenue, compared with $888.4 million, or 70.4%.
Cash, debt, and liquidity. Cash was $23.8 million at quarter-end, down from $36.8 million at December 31, 2023. Revolver debt was $166.0 million, compared with $140.0 million at year-end, at a 7.5% weighted-average rate. Under its ABL borrowing base, Liberty reported $291.7 million of remaining availability, including the effect of $7.4 million in letters of credit. The facility matures in January 2028; the company reported compliance with debt covenants. Finance lease liabilities totaled $193.7 million and operating lease liabilities $87.7 million. TRA liabilities totaled $112.4 million, including $37.4 million due within 12 months.
Operating cash flow less reported cash capital expenditures was approximately $14.4 million. Cash decreased by $13.0 million over the quarter after investing and financing activities. The company paid $11.6 million in dividends and repurchased $30.2 million of stock.
Changes and management commentary
- Revenue fell primarily due to lower fleet utilization as demand for fracturing services softened, lower materials pricing, and slightly lower service prices. Cost of services also declined with lower materials costs and utilization, but less than revenue.
- Depreciation, depletion, and amortization rose 30.5% to $123.2 million, reflecting additional equipment placed in service, including digiTechnologies equipment. Investing cash outflow increased as Liberty continued equipment investment.
- Management described industry demand as relatively steady and market conditions as constructive, with service companies focused on disciplined pricing and quality. The U.S. and Canadian average onshore rig count was 810 in Q1 2024, down from 965 a year earlier but up from 781 in Q4 2023. Management noted higher oil prices and weaker natural gas prices, and expects energy demand and LNG exports to support future natural gas demand.
- Liberty has more than 40 active fracturing fleets and is investing in electric and hybrid digiFleets, dual-fuel equipment, and related gas-supply capabilities. Management states digiFleets have an approximately 25% lower CO2e emissions profile than Tier IV dual-fuel fleets.
Outlook, risks, and notable items
- The filing provides no specific numerical revenue, earnings, or capital-spending guidance. Management cautions that quarterly results are not necessarily indicative of full-year results and identifies sustained lower commodity prices as a potential adverse factor.
- Key business exposures include oil and gas activity and pricing, customer demand and utilization, competition and service pricing, customer credit, and foreign-currency movements. One customer represented 15% of Q1 revenue and 15% of receivables and unbilled revenue at quarter-end.
- Purchase commitments for proppant, transload services, and equipment totaled $97.5 million, including $84.5 million for the remainder of 2024. Potential shortfall fees could reach $16.0 million for the remainder of 2024 and $5.4 million in 2025 if minimum purchases are missed and suppliers do not agree to changes; management does not currently expect significant fees.
- Management stated that pending litigation was not expected to have a material adverse effect based on information currently available. No new or materially changed risk factors were reported. Disclosure controls were assessed as effective, with no material internal-control changes reported.
- The board increased the cumulative share-repurchase authorization to $750 million and extended it through July 31, 2026; $391.8 million remained available at quarter-end. A $0.07-per-share dividend was approved for payment in June 2024.
Important facts for investors to verify
- Whether lower fleet utilization, pricing, and materials costs persist, and how these affect margins and cash generation.
- Whether planned investment in digiFleets and other equipment earns returns sufficient to offset higher depreciation and lease obligations.
- Availability under the borrowing base, revolver borrowings and interest costs, covenant headroom, and upcoming TRA payments.
- Customer concentration and collections, including the 15% customer exposure and the cash-flow impact of receivables and unbilled revenue.
- Execution against proppant purchase commitments, dividend and repurchase spending, and management’s non-GAAP EBITDA measures relative to GAAP results.