Liberty Energy Inc. annual report, FY2023

Business context and reporting period

Liberty Energy Inc. (NYSE: LBRT) filed this audited Form 10-K for the fiscal year ended December 31, 2023. It provides hydraulic fracturing and related services across North America, including wireline, proppant delivery, sand, and natural-gas compression and delivery. The company reports one operating segment. Although the request references 2023 Q4, this filing reports full-year results; it does not provide a clear standalone fourth-quarter financial summary in the supplied text.

Key financial metrics

Amounts are in millions except per-share data, percentages, and where noted.

Metric20232022Change
Revenue$4,747.9$4,149.2+14%
Operating income$760.6$495.9+53%
Net income attributable to Liberty stockholders$556.3$399.6+39%
Diluted EPS$3.15$2.11+$1.04
Adjusted EBITDA$1,213.1$860.3+41%
Cash from operating activities$1,014.6$530.4+$484.2
Cash used in investing activities$(672.3)$(450.7)$(221.7) more used
Cash used in financing activities$(349.3)$(55.8)$(293.5) more used

Operating margin was approximately 16.0% versus 12.0%; net margin was approximately 11.7% versus 9.6%. Adjusted EBITDA is a non-GAAP measure and should be considered alongside GAAP results.

Liquidity, debt and capital allocation

  • Cash and cash equivalents were $36.8 million at year-end, down from $43.7 million. The current ratio was approximately 1.49.
  • Year-end debt was $140.0 million under the ABL Facility; the term loan was repaid in January 2023. ABL borrowing-base availability was $277.7 million after $2.6 million of letters of credit. The facility matures January 23, 2028; the company reported compliance with covenants.
  • Finance lease liabilities totaled $173.5 million and operating lease liabilities $91.8 million. Purchase commitments were $156.8 million, primarily due in 2024.
  • Capital expenditures and construction in progress purchases were $603.3 million. Operating cash flow less those purchases was approximately $411.3 million, before other investing activity.
  • Liberty repurchased 13.7 million shares for $203.1 million during 2023 and paid $37.5 million in dividends. The board increased the repurchase authorization to $750 million and extended it through July 2026 in January 2024; future purchases are discretionary.

Material changes versus the prior comparable period

  • Revenue rose with higher service pricing, reactivated fleets and improved fleet efficiency. Cost of services increased 6%, slower than revenue, while G&A rose 23% amid labor inflation, higher activity-related costs and share-based compensation.
  • Depreciation, depletion and amortization increased 30% to $421.5 million, reflecting additional equipment, including digiTechnologies deployments.
  • The effective tax rate shifted to 24.3% expense from a 0.2% benefit in 2022. The prior-year result included release of a valuation allowance; 2023 included $178.5 million of tax expense.
  • Other expense declined to $25.7 million from $96.4 million, largely because 2022 included a $76.2 million loss on remeasurement of the tax receivable agreement liability. The 2023 remeasurement resulted in a $1.8 million gain.
  • Operating cash flow increased, while investing outflows rose with equipment investment and the $75.7 million Siren acquisition. The company launched Liberty Power Innovations and acquired Siren, a Permian natural-gas compression and CNG delivery business, in April 2023.
  • Share count declined following repurchases; year-end Class A shares outstanding were 166.6 million versus 178.8 million a year earlier.

Outlook, commentary, risks and unusual items

  • Management described the 2024 frac-industry outlook as stable, citing relatively steady service pricing and a right-sized supply of marketed fleets. It expects higher completion intensity to support horsepower demand and fleet utilization. This is qualitative commentary, not numerical company guidance.
  • Management noted range-bound oil prices and operator plans for flat to modest production growth in 2024. Near-term natural-gas markets were described as pressured, with improved conditions expected in 2025 as power demand and LNG exports grow.
  • Industry activity is cyclical and seasonal; the company says its most notable activity declines typically occur in Q4. WTI averaged $77.58/barrel in 2023 versus $94.90 in 2022, and the average U.S. and Canadian onshore rig count in Q4 2023 was 781 versus 947 a year earlier.
  • Principal risks include commodity-price and customer-spending volatility, regulatory or climate-related limits on hydraulic fracturing, environmental and safety liabilities, weather and water constraints, supply-chain and labor pressures, customer concentration, cyber incidents, and variable interest rates. The five largest customers contributed approximately 34% of 2023 revenue; none individually exceeded 10%.
  • The company reported $117.7 million of tax receivable agreement liabilities, including $5.2 million current, and expects a $5.2 million payment within 12 months. Certain change-of-control or early-termination events could accelerate payments and create a material liquidity burden.
  • A $14.8 million receivable from a related-party customer is recorded in other assets; payment terms were extended to January 1, 2025. The company recorded a $0.8 million credit-loss provision in 2023.
  • Supply agreements include potential shortfall fees of up to $25.2 million in 2024 and $5.4 million in 2025 if minimum purchases are not met, though management does not currently expect significant fees. Management reported no material expected adverse effect from pending litigation and no property-and-equipment impairment triggering events in 2023.
  • Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls and internal controls were effective at year-end.

Important facts for investors to verify

  1. Review the audited statements and notes for the drivers and sustainability of 2023 earnings and operating cash flow, including the impact of taxes, depreciation and non-GAAP adjustments.
  2. Track utilization, pricing, fleet supply and customer activity against management’s qualitative 2024 outlook; the filing provides no quantified revenue or earnings guidance.
  3. Assess capital intensity, commitments and liquidity together: equipment spending, lease obligations, proppant purchase commitments, and ABL availability can affect cash available for shareholder returns.
  4. Monitor the related-party receivable and the $117.7 million TRA liability, including payment timing and any potential acceleration provisions.
  5. Confirm the pace and funding of future buybacks and dividends; the repurchase authorization does not obligate the company to buy shares.