Liberty Energy Inc. (LBRT) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; balance-sheet comparisons are to December 31, 2021. The company provided hydraulic fracturing and related services and goods across North America. After quarter-end, its name changed from Liberty Oilfield Services Inc. to Liberty Energy Inc., effective April 25, 2022.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $792.8 million | $552.0 million |
| Operating income (loss) | $3.8 million | $(42.2) million |
| Net income (loss) | $(5.5) million | $(38.6) million |
| Net loss attributable to Liberty stockholders | $(5.4) million; $(0.03) per share | $(34.2) million; $(0.21) per share |
| Adjusted EBITDA (non-GAAP) | $91.8 million | $31.7 million |
| Cash provided by operating activities | $14.6 million | $27.5 million |
| Cash used in investing activities | $(90.9) million | $(23.8) million |
- Revenue rose 43.6%, driven by higher service pricing and fleet utilization as demand recovered. Cost of services increased 34.3% to $670.0 million, reflecting higher activity and inflation in materials, labor, repairs, and maintenance.
- Revenue less cost of services, before separately reported depreciation and other operating expenses, was $122.8 million, or about 15.5% of revenue, versus $53.1 million, or 9.6%, in Q1 2021. Operating margin was about 0.5%, compared with negative 7.6%.
- Cash flow from operations declined despite improved earnings, principally due to working-capital needs, including a $106.4 million cash use from trade and related-party receivables and unbilled revenue. Property and equipment purchases were $91.0 million; operating cash flow less those purchases was approximately negative $76.4 million.
Financial position and liquidity
- Cash was $32.9 million at March 31, 2022, up from $20.0 million at year-end. Total assets were $2.19 billion and total equity was $1.23 billion.
- Total debt, before unamortized discounts and financing costs, was approximately $214.0 million: $108.0 million drawn on the revolver and $106.0 million on the term loan. The filing reports $212.2 million of debt net of those amounts. Revolver availability was $189.0 million, after a $1.4 million letter of credit; availability was subject to borrowing-base limits. The weighted-average rate on outstanding borrowings was 6.5%.
- Debt maturities are concentrated in 2024, when approximately $211.0 million is scheduled. The company reported compliance with debt covenants at quarter-end. It also had $41.7 million payable under tax receivable agreements and substantial operating lease obligations.
Changes, outlook, and significant items
- Management described a tightening frac-services market, rising activity, limited available capacity, equipment attrition, labor shortages, supply constraints, and logistics bottlenecks. It cited inflationary cost pressure and continued investment in equipment, including digiFrac. No quantitative earnings or revenue guidance is provided in the filing.
- Management noted elevated energy demand and commodity prices, while flagging uncertainty around Russia’s invasion of Ukraine, potential sanctions, inflation, supply chains, COVID-19 developments, and interest-rate increases.
- Capital spending rose materially year over year. Net financing cash inflow included $90.0 million of net revolver borrowings, helping fund investment and working capital.
- A $4.4 million loss was recorded on two facilities held for sale; the company said their carrying value exceeded estimated fair value less selling costs. A separate $4.2 million noncash loss arose from remeasurement of the tax receivable agreement liability.
- PropX, acquired in October 2021, expanded proppant handling and logistics offerings and contributed to the year-over-year comparison; Q1 2021 included no PropX results. The company continued integrating PropX controls and operations.
- The company entered a settlement in principle to resolve the Joseph securities class action, subject to definitive documentation and court approval; expected payment obligations were within available insurance. It also disclosed a separate related class action and stated management did not expect other litigation, in aggregate, to materially adversely affect its financial position or results.
- Supply agreements and related commitments totaled $21.3 million. Potential shortfall fees could reach $11.1 million for the remainder of 2022 and $1.4 million in 2023 if minimum purchases are missed and suppliers do not agree to changes; management did not expect significant fees at forecast activity levels.
Important facts for investors to verify
- Whether stronger pricing and fleet utilization can offset labor, input-cost, and logistics pressures, and support sustained operating profitability and cash generation.
- Capital-spending plans and working-capital needs, particularly receivables and unbilled revenue, alongside revolver usage and borrowing-base availability.
- The 2024 term-loan maturity, applicable covenant triggers, and the effect of the debt structure on liquidity and flexibility.
- Progress and final terms of the securities-litigation settlement, the held-for-sale property dispositions, and any changes to purchase commitments or shortfall exposure.
- Tax valuation allowances and tax receivable agreement liabilities; the filing notes a $5.5 million expected tax-refund receivable, which investors may wish to track for collection.